SFC Fined Saxo Capital Markets After Probe into Unauthorised Products

The Securities and Futures Commission (SFC) has reprimanded and fined Saxo Capital Markets HK Limited (SCMHK) HK$4 million for regulatory breaches linked to the distribution of virtual asset (VA) funds not authorised by the SFC, as well as VA-related products made available on the firm’s online trading platform.

According to the SFC, between 1 November 2018 and 25 November 2022, SCMHK allowed retail clients to trade certain VA Products through its Online Platform. Under two SFC circulars in force during that period, these products should only have been offered to professional investors. The investigation found that SCMHK executed 1,446 transactions involving 32 VA Products for six individual professional investors and 130 retail clients. All of the products were classified as complex, including 21 exchange-traded derivative products.

SFC Fined Saxo Capital Markets After Probe into Unauthorised Products

The regulator noted that SCMHK failed to assess whether clients possessed knowledge of investing in VA Products before executing transactions. The firm also did not provide sufficient product-specific information or warning statements relating to the risks associated with virtual assets, despite regulatory guidance requiring these measures.

In addition, the SFC found that SCMHK did not have dedicated procedures in place for conducting product due diligence on VA Products during the relevant period. Instead, it relied on group-level protocols established by its parent company to identify instruments with VA exposure. Due to weaknesses in these protocols, the 32 VA Products were not identified as such and were made available to clients regardless of investor classification. SCMHK only became aware of the issue after being notified by its parent company in November 2022.

Further findings showed that SCMHK did not ensure the suitability of complex VA transactions executed on the platform or provide adequate information to help clients understand product features and risks. For 87 clients who traded exchange-traded derivative VA Products, the firm also failed to gather sufficient information to assess derivatives knowledge.

The SFC concluded that these failures breached the Guidelines on Online Distribution and Advisory Platforms and the Code of Conduct. In determining the sanction, the regulator considered the duration of the misconduct, SCMHK’s self-reporting, client compensation efforts, cooperation with the investigation, cessation of regulated activities, and its clean disciplinary history.

Company Overview

Saxo Bank stands out as a premier multi-asset broker, offering exceptional research capabilities and an exceptional trading platform, along with an impressive array of over 70,000 tradable instruments, which include spot forex, FX options, NDFs, CFDs, stocks, stock options, exchange-traded funds, ETNs, futures, and 33,000 bonds. For engaged traders, Saxo Bank offers a comprehensive and immersive trading journey, boasting an extensive toolkit, research resources, and premium features.

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