In the October edition of the Enforcement Reporter, the Securities and Futures Commission (SFC) stated that it has commenced investigations into alleged mis-selling of Lehman Brothers minibonds. The SFC took the opportunity to clarify the following different types of mis-selling:

  1. an investor may be given wrong information about a financial product leading him or her to make an investment decision which the person would not have made if the correct information had been provided; and
  2. an investor ends up investing in a product that is not suitable given his financial position, investment objectives, expectations and risk tolerance level.

These two major types of mis-selling are addressed directly in the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC which requires banks or SFC-licensed firms to understand the products they are selling and to ensure only suitable products are sold to their clients.

A copy of the Enforcement Reporter is available on the SFC website.