Sit Wai Hong was with HSBC in October 2010 when he failed to take reasonable steps to ensure that the customer had sufficient resources to buy the ILAS and will now remain suspended until 18 June 2016, the Hong Kong regulator said.
The total premium payable on the ILAS was grossly disproportionate to the customer’s net worth and monthly income and it would have exhausted the customer’s lifelong savings after just payment of the first annual premium.
An early encashment charge is usually applied on the early surrender and withdrawal from an ILAS. In Sit’s case, the early encashment charge was applied on a reducing scale throughout the terms of the ILAS, for example, 50% (first year), 30% (second year) and 21% (third year).
Sit, who the regulator stated now works for another bank, also failed to ensure the suitability of the ILAS for the customer “with regard to her personal background and the fact that she had no prior investment experience.”
The Hong Kong Monetary Authority further highlighted that Sit did not act with due skill, care and diligence in the best interests of the customer.
Sit is therefore not a fit and proper person to be a relevant individual according to the rules of the regulator.
In determining the disciplinary measures, the Hong Kong Monetary Authority took into account that:
- if Sit’s employer had not settled the case with the customer, the customer would have had to surrender his ILAS policy and suffer a substantial early encashment charge.
- relevant individuals are expected to observe a high standard of integrity and competency because they have access to persons from different walks of life who use the services of banks and place a high degree of trust in banks and their staff. Sit’s conduct was a breach of the trust of the customer; and
- Sit has no previous disciplinary record.
A spokesman for the Hong Kong Monetary Authority said: "ILAS is a complex product with features which to some people are not easy to understand. To minimize the risk of mis-selling, banks and their staff are expected to take all necessary measures to ensure that the ILAS is indeed suitable when sold to the customer and that the customer understands clearly the key features of the ILAS before purchasing it.”
At the time of this misselling case, SIT was registered as a person engaged by HSBC in respect of Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.