Regulators in Hong Kong have sanctioned Manulife Asset Management for internal control failings that they say comprised investor suitability assessments.
The Securities and Futures Commission (SFC) announced today that it has reprimanded Manulife Asset Management (Hong Kong) Ltd., and fined it HK$24 million ($3.2 million), for inadequate internal controls in relation to the distribution of Manulife Global Fund from 2007 to 2012. It says that the decision follows an SFC investigation into the distribution of the fund which found “a number of serious deficiencies in the way the Manulife Global Fund was distributed”.
The SFC says that its findings focus on the firm’s systems and processes for understanding its customers’ financial situation, investment experience, and investment objectives. It reports that the firm failed to properly collect this information from all its clients.
“Together with concerns about the quality and extent of Manulife Asset Management’s record-keeping, these failures have jeopardized Manulife Asset Management’s capacity to ensure that recommended securities are suitable for each customer,” it notes.
The SFC adds that despite these failures, no customers have complained about the performance or suitability of the fund, and there has been no default in any of the sub-funds of the Manulife Global Fund. Moreover, it says Manulife Asset Management “has a clean record and has co-operated with the SFC in resolving this matter, including agreeing to conduct an independent review of its distribution system for funds and to enhance its complaint handling procedures to resolve, in a fair and reasonable manner, all client complaints arisen from this matter.”
“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,” says the SFC’s executive director of enforcement, Mark Steward.