The Eastern Magistrates Court in Hong Kong has convicted ETRADE Securities (Hong Kong) Limited (ETrade HK) for unauthorized marketing. In particular, E*TRADE Securities LLC (ETrade US) does not hold a license with domestic regulatory authorities, including the Securities and Futures Commission (SFC).
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While ETrade HK is based in HK and licensed with the SFC, ETrade US is a US-based firm licensed with the Securities and Exchange Commission (SEC) in the US and not with the SFC.
Between May 11 2009 and January 31 2014, ETrade HK had been actively promoting the brokerage services of ETrade US through multiple mediums including newspapers, magazines, and TV, citing a report from the SFC. It is also reported that ETrade HK earned commissions from ETrade US for such marketing activities, once the clients from HK began to sign up to ETrade US.
Such actions are prohibited under the regulations of the SFC as the entity ETrade US is unregulated in Hong Kong. Consequently, the SFC has pursued legal action against SFC HK and ETrade HK, which pleaded guilty to helping ETrade US project itself as a licensee of the SFC.
As a result of this conviction, ETrade HK was asked to pay a fine of $20,000 whilst also covering the investigation costs of the SFC. The SFC has warned its clients and investors to check its website periodically to keep abreast of developments and the list of registered entities, so that they are aware of which individuals and entities have been licensed.