The Hong Kong regulator, the Securities and Futures Commission, said the difference between professional and retail investors was “profoundly important” and that by failing to segregate such clients, undue risks had been imposed on investors.
The fine follows an SFC investigation relating to a period between October 2006 and July 2008. The SFC said Julius Baer had not followed its rules by taking adequate steps to identify whether an investor was classed as retail or professional.
The latter category requires an investor to have a portfolio worth at least HK$8m in a foreign currency, evidence for which must be provided through a certificate issued by an auditor or accountant.
According to the SFC, Julius Baer also failed to conduct annual reviews to ascertain whether clients continued to fulfill professional investor requirements and did not record advice its staff had given.
Julius Baer, though agreeing to pay the fine, denies the SFC’s findings. However, as part of the ‘resolution’ process following the investigation, the Swiss-owned wealth manager will conduct an internal review into its client identification and segregation practices.
“The difference between professional investors and ordinary retail customers is a profoundly important one. Firms that do not classify customers properly, in strict compliance with the requirements, impose undue risks on those customers. The SFC will not hesitate to take deterrent action in these cases,” said Mark Steward, SFC executive director of enforcement.
