Hong Kong Regulator Fines Saxo Over Retail Crypto

Hong Kong regulator fines Saxo HK$4 million for offering professional-only crypto products to retail investors in Hong Kong

Key Points:

• Hong Kong’s SFC fined Saxo HK$4 million for offering professional-only crypto products to retail clients.
• Regulators cited failures in client knowledge assessments, risk disclosures, and virtual asset product controls.

Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Saxo Capital Markets Hong Kong HK$4 million, or about US$514,000, for breaching regulatory requirements governing virtual asset products. The action follows an investigation into Saxo’s offering of crypto-related instruments to retail clients despite restrictions limiting such products to professional investors.

The regulator found that Saxo Capital Markets Hong Kong offered 32 unauthorised virtual asset products on its online trading platform between 1 November 2018 and 25 November 2022. During this period, Hong Kong regulations allowed intermediaries to distribute these products only to professional investors because of their complex structure and higher risk profile.

Hong Kong Regulator Fines Saxo Over Retail Crypto

According to the SFC’s findings, Saxo executed 1,446 transactions involving the 32 virtual asset products for 136 clients. These clients included six individual professional investors and 130 retail investors. Of the products involved, 21 were exchange-traded derivative virtual asset products, which the regulator classified as complex instruments.

The investigation also identified significant compliance gaps. Saxo did not assess whether its clients possessed adequate knowledge or experience in investing in virtual asset products. The regulator further determined that the firm failed to provide sufficient product-specific information and risk warnings related to virtual assets. In particular, Saxo did not conduct knowledge assessments for 87 Hong Kong clients, including 82 retail clients, who traded the exchange-traded crypto derivatives.

In addition, the SFC found that Saxo lacked specific procedures for conducting product due diligence on virtual asset products during the period in question. Instead, the Hong Kong unit relied on group-wide identification protocols established by its Danish parent company. Due to deficiencies in those protocols, the 32 products were not properly identified as virtual asset products, leading to regulatory breaches.Saxo reportedly became aware of the deficiencies only in November 2022, after its parent company raised the issue. The enforcement action comes about a year after Saxo closed its Hong Kong office and ceased operations in the jurisdiction. The firm has also consolidated its Asia-Pacific operations, including closing offices in Shanghai and reducing its presence in other regional markets.

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