Credit Suisse Fined HK$2.8 Million for Failing to Disclose Conflictsof Interest in Research Reports
Hong Kong, June 20,2019 – Credit Suisse (Hong Kong) Limited (CSHK) and Credit Suisse AG (CSAG) have been publicly censured andfined a total of HK$2.8 million by the Securities and Futures Commission (SFC) for failing to comply with disclosure requirements in certain research reports on HongKong-listed securities.
The SFC’s investigation revealed that Credit Suisse, in its research reports, failed to disclose its investment banking relationships with the issuers of the securities being analyzed. This omission violated the SFC’s Code of Conductfor Licensed Corporations and Registered Persons, which mandates that any securities intermediary engaged in investment banking, proprietary trading, or market making activities in Hong Kong must disclose any existing or potential conflicts of interest arising from their relationship with the issuer of a security.
The SFC emphasized the importance of transparency and disclosure in the financial markets, stating that licensed intermediaries have a responsibility to ensure that their research reports are free from conflicts of interest. The regulator also highlighted the need for intermediaries to have robust systems in place to detect and disclose any potential conflicts of interest.
Licensed intermediaries inHong Kong are expected to comply with disclosure requirements and to have appropriate systems in place to detect and disclose disclosure deficiencies, said the SFC in a statement. The SFC will take appropriate action against intermediaries who fail to comply with these requirements.
This is not the first time that Credit Suisse has faced regulatory scrutiny for its researchpractices. In 2017, the US Securities and Exchange Commission (SEC) fined Credit Suisse $10 million for failing to disclose conflicts of interest in its research reports on Chinese companies.
The SFC’s action against Credit Suisse serves as a reminder to all financial institutions operating in Hong Kong of the importanceof adhering to disclosure requirements and maintaining ethical standards. The regulator’s commitment to enforcing these rules is crucial for maintaining investor confidence and ensuring the integrity of the financial markets.
Background:
- Credit Suisse is a global financial services company headquartered in Zurich, Switzerland. It provides a wide range of financial services, includinginvestment banking, asset management, and private banking.
- The SFC is the independent regulatory body responsible for regulating the securities and futures markets in Hong Kong. Its mission is to protect investors, maintain market integrity, and promote the development of the financial markets.
Key Takeaways:
- Financial institutions must be transparent abouttheir conflicts of interest in research reports.
- Robust systems are needed to detect and disclose any potential conflicts of interest.
- The SFC will take action against institutions that fail to comply with disclosure requirements.
Impact:
- The SFC’s action is likely to deter other financial institutions from engaging in similar practices.
- It may lead to increased scrutiny of research reports by regulators and investors.
- It could also result in changes to industry practices and standards.
Looking Ahead:
The SFC’s action against Credit Suisse is a significant development in the ongoing effort to ensure the integrity of the financial markets. It isexpected that the regulator will continue to take a proactive approach to enforcing disclosure requirements and holding financial institutions accountable for their actions.
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