Principal Intermediary's WhatsApp Sales Team and Deleted Records

There are several distinct failures. First, a former SI who has resigned is still advising clients. Once he ceased to be an SI under the firm, he should not be held out as acting for Goodway or continue to advise its clients using the firm's channels. The principal intermediary must ensure that only properly registered and supervised staff advise clients and must retrieve client records.

Second, the three clients were onboarded without risk-profiling questionnaires. Suitability cannot be assessed without knowing the client's financial situation, investment experience, risk tolerance and needs. The deletion of chat history is a record-keeping and integrity failure, especially after a complaint; records relevant to a complaint must be preserved.

Third, the HK$500 cash rebate is a sales inducement that creates a conflict and encourages switching for the wrong reason. It is inconsistent with suitability and fair dealing, and may involve misleading statements about the benefits of transfer. Fourth, keeping 40 clients' records in a personal cloud account is a security, confidentiality and record-retention failure. The CEO's instruction to 'fix it quietly' is itself a governance failure because material breaches and misconduct should be escalated and reported as required.

Goodway should immediately suspend the former SI's access to the WhatsApp group, client systems and any firm premises or data. It should notify clients who are being advised by him that he no longer acts for the firm, appoint a current registered SI to take over those relationships, and retrieve all client files and records. The firm should assess whether any advice given after his resignation caused client detriment and remediate if necessary.

For records, the firm should preserve all existing evidence, including the personal cloud account and any remaining WhatsApp data, and migrate the records into the firm's approved system. Deleted messages should not be treated as gone; the firm should attempt recovery and document the deletion. Records should be complete, accurate, secure and retrievable, and retained for at least the applicable retention period (generally seven years). A litigation or complaint hold should be applied.

The cash rebate scheme should be stopped immediately. The firm should identify affected clients, correct any misleading impression, review whether the transfers were suitable, and consider compensating clients for any loss caused by an unsuitable switch. The sales manager should be subject to disciplinary and remediation action. The firm should also review its supervision, training and monitoring of SIs.

Goodway should not 'fix it quietly'. As a principal intermediary, it is responsible for supervising its SIs and for notifying the MPFA of material changes and misconduct as required. The resignation and continued client contact by a former SI, the deletion of records, the failure to complete risk profiling and the cash rebate are all material compliance issues. The firm should make a prompt and candid notification to the MPFA, preserve all evidence, and provide a remediation plan.

Staying silent increases the risk. If the MPFA later discovers the conduct through a client complaint or an inspection, the firm will face worse consequences because it failed to supervise and failed to report. The absence of client loss so far is not a defence; conduct breaches and record-keeping failures can be sanctioned even without proven financial loss. The firm should also consider whether the clients need to be informed and whether the matters are reportable to other authorities. The CEO's instruction should be documented and overridden by the compliance and board escalation process.