Saxo Financial fined 4 million, why has virtual asset distribution become a regulatory focus

The Hong Kong Securities and Futures Commission (SFC) has issued a HKD 4 million fine to Schwab Financial (Hong Kong) Limited for distributing unapproved virtual asset-related products to 130 retail clients and 6 professional investors between 2018 and 2022. This is not only a penalty but also reflects the regulator’s strict stance on the compliance standards for virtual asset distribution. Most notably, these violations persisted for over four years, during which basic compliance measures were absent.

The Three Major Issues of the Violations

According to the SFC announcement, Schwab Financial’s violations mainly manifested in three areas:

These three issues are not isolated lapses but systemic compliance deficiencies that persisted for more than four years. This indicates fundamental problems in Schwab Financial’s risk management system regarding virtual asset activities.

Why Virtual Asset Distribution Became a Regulatory Focus

Core Consideration of Customer Protection

The high-risk nature of virtual asset products necessitates stricter regulation. Retail clients often lack professional knowledge; without proper knowledge assessment and product due diligence, they are easily exposed to losses due to unfamiliarity with the risks. In this case, 136 clients (130 retail clients and 6 professional investors) fell victim to these deficiencies.

Risks of Unapproved Products

Distributing “unapproved” virtual asset products means these products have not been reviewed or approved by the regulatory authority. This is equivalent to selling products to consumers without safety certification, making the risks obvious.

Severity of Continuous Violations

Over four years of ongoing violations indicate systemic management flaws rather than a momentary oversight. Such long-term misconduct threatens the authority of the regulator and market order, and therefore warrants more severe penalties.

Industry Insights

This case provides clear lessons for virtual asset-related institutions:

• Virtual asset distribution must strictly adhere to client assessment requirements and cannot skip steps
• Product due diligence is a fundamental requirement, not optional
• Full disclosure of client risks is a legal obligation, not a marketing expense
• Protection standards for retail clients must not be lowered

Summary

Schwab Financial’s penalty reflects an important signal: regulators will not tolerate systemic compliance failures in virtual asset activities. The HKD 4 million fine, combined with voluntary compensation and business termination, serves both as punishment for misconduct and as a warning to the industry. For other virtual asset distribution entities, the lesson is straightforward—client assessment, product review, and risk disclosure are basic responsibilities that must be fulfilled; otherwise, the consequences include not only fines but also the loss of business prospects.