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Merrill Lynch fined $3m by Hong Kong regulator

The SFC in Hong Kong has reprimanded and fined Merrill Lynch $3m for systems failings.


The SFC said its decision follows an investigation in which it found that Merrill Lynch had failed to properly asses the financial situation and investment objectives of over 40 of the 72 customers who invested in the index-linked notes during 2007.

The regulator also said it was concerned that key product information was only provided to clients after they had agreed to invest in the product and that Merrill Lynch kept inadequate documentation to explain the rationale behind the advice they had given to their customers.

As part of the agreement, Merrill Lynch has agreed to repurchase the outstanding index linked notes. The company said it would repurchase the notes, when in receipt of valid acceptance forms from customers, at 100% of the principal amount invested.The value of the repurchase offers is expected to be approximately US$3,674,405 (equivalent to HK$28,660,359).

Furthermore, Merrill Lynch has agreed to offer top-up payments to customers who bought the index-linked notes and redeemed them for less than their principal invested.

In addition to these measures, Merrill Lynch said it will implement enhanced complaint-handling procedures to review client complaints regarding the distribution, sale, and provision of investment advice in relation to unlisted structured products other than the two index-linked notes.

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