Hong Kong’s Securities and Futures Commission (SFC) announced today that it has reprimanded and fined Guotai Junan Securities Ltd (Hong Kong) $1.3 million for failing to comply with its regulatory requirements in relation to ascertaining client identity.
The fine follows a further seven figure penalty which was imposed on Unicorn Securities Company Ltd in March this year, as reported by Finance Magnates.
Client Identity Rule
The Client Identity Rule policy stipulates that a licensed person must refuse the business of those who are not prepared to provide client identity information to the regulators on request.
It also stipulates that if a licensed person has been put on notice that an intermediary involved in a transaction does not comply with its agreement in relation to that transaction, the SFC will consider taking disciplinary action against the licensed person.
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Failed To Comply
In July 2014, the SFC requested that Guotai Junan provide details of the ultimate clients of certain transactions it effected for an intermediary client in Korea. Guotai Junan was unable to provide the requested information in accordance with the Client Identity Rule policy.
The intermediary client then informed the SFC and Guotai Junan on 1 August 2014 that it could not provide the requested client identity information without its clients’ written consent. Guotai Junan did not provide the requested information to the SFC until January 2015.
Guotai Junan then continued to effect over 8,000 transactions for the intermediary client between August 2014 and January 2015 despite having been reminded by the SFC of its obligation to refuse the business of those who are not prepared to provide ultimate client information to the regulators.
The SFC concluded that it could no longer be satisfied that Guotai Junan would be able to make available the ultimate client information on request and the company is now facing a $1.3 million fine for contravening its rules and regulations.