SFC Fines Fulbright Securities $3.5 Million for Short Sale Violations
- Hong Kong’s regulations require firms to deliver the shares, after completion of a short sale transaction.
Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Fulbright Securities Limited HK$3.5 million ($450,000) for violating ‘naked short selling’ rules.
According to the SFC’s filing, the incident in question occurred between October 2015 and March 2016, when Fulbright executed at least 93 short sales. The review found lapses in its internal controls and systems, adding that the company failed to put in place controls to detect and prevent illegal trades.
Additionally, the SFC found that Fulbright failed to ensure the accuracy of the information it submitted to the SFC and did not report these incidents immediately upon discovering them.
Short selling, which allows investors to make gains in a falling market by borrowing a security they do not own, selling it and agreeing to buy it back at a lower price, plays an important role in developed capital markets since it makes price discovery more efficient and smooths Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term whilst providing investors with a host of Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term tools.
Hong Kong’s regulations require firms to deliver the shares, after completion of a short sale transaction, on the settlement date or take affirmative action to close out the 'failure to deliver' shares by purchasing or borrowing the securities. To limit ongoing naked short positions, the broker has no choice but to reject any additional sale orders if the securities were not delivered or closed out within legally required time frames.
Fulbright Has No Previous Disciplinary Record
Fulbright Securities Limited were among three brokers the SFC prohibited last year from accepting or placing orders listed on derivative warrants in client accounts that are linked to suspected market misconduct.
While the SFC did not identify who it suspects to have committed this market misconduct, it highlighted that it was not investigating the three brokers in question. In fact, the regulator stated that the three companies have cooperated with its ongoing investigation.
In reaching its decision, the SFC said Fulbright Securities had been cooperative during its investigation, and there is no evidence that failures were deliberate. Furthermore, the company had taken positive and extensive remediation work. Furthermore, it has conducted a forward-looking review of its internal controls to ensure compliance with the relevant regulatory requirements.
Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Fulbright Securities Limited HK$3.5 million ($450,000) for violating ‘naked short selling’ rules.
According to the SFC’s filing, the incident in question occurred between October 2015 and March 2016, when Fulbright executed at least 93 short sales. The review found lapses in its internal controls and systems, adding that the company failed to put in place controls to detect and prevent illegal trades.
Additionally, the SFC found that Fulbright failed to ensure the accuracy of the information it submitted to the SFC and did not report these incidents immediately upon discovering them.
Short selling, which allows investors to make gains in a falling market by borrowing a security they do not own, selling it and agreeing to buy it back at a lower price, plays an important role in developed capital markets since it makes price discovery more efficient and smooths Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term whilst providing investors with a host of Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term tools.
Hong Kong’s regulations require firms to deliver the shares, after completion of a short sale transaction, on the settlement date or take affirmative action to close out the 'failure to deliver' shares by purchasing or borrowing the securities. To limit ongoing naked short positions, the broker has no choice but to reject any additional sale orders if the securities were not delivered or closed out within legally required time frames.
Fulbright Has No Previous Disciplinary Record
Fulbright Securities Limited were among three brokers the SFC prohibited last year from accepting or placing orders listed on derivative warrants in client accounts that are linked to suspected market misconduct.
While the SFC did not identify who it suspects to have committed this market misconduct, it highlighted that it was not investigating the three brokers in question. In fact, the regulator stated that the three companies have cooperated with its ongoing investigation.
In reaching its decision, the SFC said Fulbright Securities had been cooperative during its investigation, and there is no evidence that failures were deliberate. Furthermore, the company had taken positive and extensive remediation work. Furthermore, it has conducted a forward-looking review of its internal controls to ensure compliance with the relevant regulatory requirements.