Hong Kong’s Securities and Futures Commission (SFC), the state’s main securities regulator, has revoked the licences of Goodcape Securities and its two officers, Tang Lin Sun and Chang Siu Ming, both of whom were licensed to partake in securities-regulated activity as permitted by the Securities and Futures Ordinance (SFO).
The disciplinary action follows the SFC’s investigation which found that Goodcape, which was prohibited from holding client assets and was required to place all orders with an execution broker as part of its licencing conditions as an introducing broker, had deliberately failed to relay trading instructions from a large number of clients to an execution broker.
The trading instructions of these clients had been passed to Tang instead of the execution broker. Clients also deposited funds into bank accounts controlled by Tang at the request of Chang and other licenced representatives of Goodcape in the belief that the funds had been used to settle their securities transactions.
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Bogus Account Statements
In order to conceal the deceptive scheme, bogus account statements had been issued to the clients while their deposited funds were withdrawn in cash or transferred to the personal bank account of Tang or his wife. A sum of approximately $90.5 million had been withdrawn from these bank accounts by Tang.
Chang, who failed to communicate order instructions of a number of Goodcape’s clients to the execution broker at Tang’s behest, had turned a blind eye to the deposit of funds by clients and connived in the issue of bogus statements.
The SFC has ruled that Goodcape, Tang and Chang are guilty of misconduct, are not fit to remain licensed and have thus been prohibited from re-entering the industry for life and three years, respectively.
In deciding the penalty, the SFC took into account all relevant circumstances including that the misconduct was egregious and serious, the significant losses suffered by Goodcape’s clients and the need to remove Goodcape, Tang and Chang from the industry to protect the investing public.