SFC reprimands and fines Merrill Lynch

On 12 May 2011, the SFC reported that it had issued a reprimand to Merrill Lynch (Asia Pacific) Ltd (Merrill Lynch) and fined it HK$3 million for inadequate systems in relation to the sale of two index-linked notes to 72 clients in 2007.

This decision follows an SFC investigation in which the SFC raised concerns that Merrill Lynch had failed to properly assess the financial situation and investment objectives of over 40 of the 72 customers who invested in the index-linked notes during 2007. The SFC was also concerned that key product information was only provided to clients after they had agreed to invest in the index-linked notes and that Merrill Lynch kept inadequate documentation to explain the rationale behind the advice they had given to their customers.

In addition to the fine, Merrill Lynch has agreed to implement a resolution scheme in which it will make payment to repurchase from customers holding the outstanding index-linked notes and offer top up payments to customers who bought the index-linked notes through Merrill Lynch and redeemed them for less than their principal invested.

Merrill Lynch will also implement an Enhanced Complaint-Handling Procedures (ECHP) to review client complaints regarding its distribution, sale, and provision of investment advice.

Further details are available here