Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined BOCOM International Securities Limited (BISL) a total of $2.5 million (19.6 million HKD) for “serious” regulatory breaches, including failures concerning the handling of third party fund deposits and the maintenance and implementation of a margin lending and margin call policy, the regulator said in a statement today.
BOCOM International Securities is a subsidiary of Hong Kong-based Bocom International Holdings, which is in turn a unit of Bank of Communications.
According to the SFC, BISL also failed to put in place adequate and effective controls to identify deposits made into client accounts by third parties, hence failed to ensure compliance with the Guideline on Anti-Money Laundering and Counter-Terrorist Financing and various provisions in the Internal Control Guidelines and the Code of Conduct.
Specifically, the regulator found that third party deposits made into client accounts in 2009, 2011 and 2015 by way of cheques and bank transfers were not identified until 2016.
Extensive deficiencies were also identified during the SFC’s review of BISL’s margin lending and margin call policy from December 2012 to November 2016, the SFC said.
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In deciding the disciplinary sanction, the SFC took into account all relevant circumstances, including the fact that BISL has an otherwise clean disciplinary record.
BISL has also taken steps to revise its policies and procedures in relation to the areas where deficiencies were identified.
The firm has agreed to engage an independent reviewer to conduct a review of its internal controls.
The SFC points out that BISL’s failures are serious, extensive and lasted for a substantial period of time.
“A clear message needs to be sent to the industry that the SFC will not hesitate to take action against licensed corporations that fail to put in place appropriate internal controls to protect their operations and clients”, the regulator concluded.