Hong Kong’s Securities and Futures Commission (SFC), the country’s paramount securities regulator, has launched a new action against IDS Forex HK Limited, issuing a Restriction Notice against the brokerage and asset manager following the latest developments surrounding allegations of fraud and role of the group’s sole shareholder Kim Sunghun.
IDS Forex HK Limited is a subsidiary of IDS Group in South Korea – the group had already gained the attention of SFC following a self-report notification published by the group itself. Back in February 2017, Mr. Kim, the group’s principal shareholder, had been sentenced to twelve years imprisonment following his conviction of illegal fund-raising and fraud in South Korea.
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The story stretches as far back as 2011, with Mr. Kim effectively duping customers in an offshore scheme that included margin FX business. The conviction focused extensively on the SFC’s most recent action, as the regulatory authority felt that there were sufficient grounds to believe that the capital injections made by Mr. Kim into IDS Forex HK may have been the proceeds of illicit activity, and may also represent an attempt to launder proceeds.
Cessation of Operations
Today’s Restriction Notice on IDS Forex HK Limited will essentially halt all operations at the group, prohibiting the brokerage from carrying out all the activities for which it is licensed. This includes offering leveraged FX trading, advising on securities, and asset management. Following an initial investigation by the SFC into Mr. Kim’s activities, the group discerned that IDS Forex HK, over at least the past three years, failed to properly conduct business operations in a manner appropriate for a fit and proper licensed corporation. IDS Forex HK Limited has been licensed by the SFC for the past several years.
Moreover, the Restriction Notice also bars IDS Forex HK from dealing with any assets held by it or held on behalf of its clients without the SFC’s prior written consent. The investigation will continue despite the issuing of the notice today, during which IDS Forex HK will be unable to conduct any of its previously regulated activities. It is likely that the regulator has reason to suspect a deeper scheme across the group’s business, which it has not yet uncovered, given the role and links of Mr. Kim over the past few years.
The SFC also deemed the cessation of financial activities by IDS Forex HK to also be of benefit to customers, especially in light of an ongoing investigation into the nature and extent of fraud. The allegations are outlined in a recent report provided by the SFC, detailing the initial findings of its investigation against the group.