Hong Kong’s Securities and Futures Commission (SFC) announced on Monday that it has imposed a warning against Unicorn Securities Company Limited and its former officer, Chan Hoi Shou, in connection with asset and fund management irregularities.
Unicorn Securities, licensed under the Securities and Futures Ordinance (SFO), provides services related to dealing in securities for retail customers. The SFC has announced a $3 million fine to reprimand the entity and an additional $200,000 against Mr Chan. His SFO license was suspended for 15 months (from March 12, 2016 to June 11, 2017).
According to the local regulator’s findings, for a period of over two years (March 2011 – December 2013), the firm mishandled its clients’ dividend entitlements of shares of HSBC Holding PLC by going against their instructions regarding their choice between scrip or cash dividends when submitting their instructions to Hong Kong Securities Clearing Company Limited, giving client dividends to others.
In seven cases, Unicorn Securities received scrip dividends for all clients regardless of their instructions. After allocating the dividends to clients who elected to receive scrip dividends, the company deposited the remaining scrip dividends into the account of Chan or the account of the client. Mr. Chan was selling those HSBC shares and made a profit from the process.
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Although it failed to identify evidence suggesting that customers have suffered because of this violation, the operations were conducted without client knowledge and provided direct benefits to the company’s ex-officer.
10 months suspension for a former account executive
The local market watchdog also announced another licence suspension, this time of a former China Merchants Securities (CMSHK) account executive. Ng Hongs violated the SFC’s Code of Conduct and is not be able to provide industry related services from March 12, 2016 to January 11, 2017.
He had obtained written permission from one of his clients who agreed to carry out a transaction directly on his private account. Mr Ng did not however receive official CMSHK permission to conduct such operations and executed them over a one year period (August 2010 – September 2011) without the knowledge of the company.
As the client’s account did not function as a discretionary one, the operations might not be properly supervised and monitored. As a result, the customer’s funds were not protected in any way.