The Securities and Futures Commission issued a reprimand to Manulife AM and fined it HK$24m ($3m, £2m) following an investigation in which it found a number of “serious deficiencies” in the way the fund was distributed between 2007 and 2012.
Specifically, the SFC’s investigation focused on the company’s systems and processes for understanding its customer’s financial situation, investment experience and investment objectives in soliciting or recommending the Manulife Global Fund to them.
Between 2007 and 2009, the SFC found Manulife obtained this information by performing an investor profile for each customer. However, 73% of the customers in 2009 were not profiled or their information was either incomplete or outdated for at least 12 months.
After 2010, Manulife introduced a questionnaire to assess each customer’s risk profile. By February 2012, the new process had not been fully implemented to all customers and the firm had still not secured a completed risk profile questionnaire from 70% of the fund’s investors.
The SFC said: “Together with concerns about the quality and extent of Manulife Asset Management’s record-keeping, these failures have jeopardised Manulife Asset Management’s capacity to ensure that recommended securities are suitable for each customer.”
However, despite these failings, the SFC highlighted the fact that there had been no default in any of the sub-funds of the Manulife Global Fund – nor has any customer complained about the performance or suitability of the fund. The regulator added that Manulife has a “clean record and has co-operated with the SFC”.
The SFC’s executive director of enforcement, Mark Steward, said: “Intermediaries are obliged to ensure a product which they recommend is suitable for the customer. This cannot be done in a vacuum and is only effective if it is based on accurate, up-to-date information about the customer’s financial situation, needs and objectives. Manulife Asset Management failed to implement proper processes to comply with this most basic obligation for intermediaries.”
