The Securities and Futures Commission (SFC) in Hong Kong has slapped Sincere Securities Limited (SSL), a brokerage firm based in the regulator’s jurisdiction, with an HK$ 5 million collective fine. The fine was applied as a result of several regulatory breaches by SSL over the course of the last decade or so.
SSL was charged with a variety of regulatory breaches including failure to observe proper control measures. Some of the breaches by SSL happened under the watch of a now-former executive of the firm, and the SFC has charged the firm on those issues as well. One of the cited breaches is from a 2009 case in which SSL failed to provide an update for its Compliance and Procedural Manual.
The update was required to ensure that the manual remains in line with regulatory requirements. The SFC took into consideration the fact that SSL obtained the services of an independent reviewer in a bid to gain compliance and this consideration lessened the penalty imposed by the regulatory body.
There are also a number of other internal control failures which have resulted in SSL being penalized. The firm’s account executives failed to obtain written consent from their clients before transacting on behalf of these clients. Funds were transferred to gold trading accounts which were opened with SSL’s associated firm before written consent was received.
The regulator also said that SSL failed to properly segregate the dealing, settlement functions and sales. This means that the firm’s executives who were handling a client account ended up handling deposits and withdrawals from those clients, which is a breach of regulatory policies. These matters are supposed to be handled by different personnel.
According to the SFC, SSL’s clients could communicate with the firm’s staff on mobile phones while the staff was on the trading floor. WhatsApp Messenger and other similar chat applications were used to receive client orders and there are no records of the orders which were received in this manner.
After being charged by the regulatory authority, SSL has taken steps to rectify their mistakes in a bid to try and reach a favorable resolution. These attempts did not go unnoticed by the SFC and this is what resulted in the firm receiving a lessened penalty.
The SFC has placed an emphasis on their efforts to fight against corporate fraud and other regulatory breaches that top firms normally get away with. Trading firms are known to engage in market manipulation, money laundering and insider trading and it is these issues the SFC is bent on combating.