Hong Kong-based brokerage firm Sincere Securities Limited (SSL) was fined a collective HK$5 million ($640,000) for multiple regulatory breaches spanning ten years by the domestic regulatory authority, the Securities and Futures Commission. The fines were the result of several control failures, including those related to the conduct of a former account executive of SSL.
Some of the violations stretch back more than a decade, with one reprimand over a failure to properly update the company’s Compliance and Procedural Manual to capture the regulatory requirements that came into effect in 2009. However, the SFC noted that the brokerage had brought on an independent reviewer to review its internal control systems and procedures, which lightened the penalty.
For SSL and its account executives, the regulatory actions focused on a series of internal control failures in its operations. This included a failure to obtain clients’ written consent before transferring their funds maintained at SSL to their gold trading accounts opened with its associated company.
The lapse in oversight also extended to the failure to segregate the sales, dealing, and settlement functions effectively. This, the regulator said, led to its account executives, who were handling client orders, also handling their deposits and withdrawals operations.
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Clients orders on WhatsApp
The regulator further explains that SSL policies didn’t prohibit staff from receiving client order instructions through mobile phones when they are on the trading floor. “Some client order instructions were received through mobile phone applications, such as WhatsApp messenger, while they were in SSL’s office but no contemporaneous record of the order details was maintained,” it says.
For its part, SSL reached a quick resolution, taking immediate remedial actions to reconcile these lapses. This was instrumental in averting a higher fine for the bank. The fact that the broker cooperated in resolving the SFC’s concerns also helped its cause.
The SFC serves as the region’s paramount regulator, and it routinely shores up forms of market abuse, regulatory lapses and other compliance issues.
The Hong Kong regulator has recently made fighting against corporate fraud its top enforcement priority. Other key tasks include battling insider dealing and market manipulation, intermediary money-laundering, and internal control failures.