The Securities and Futures Commission of Hong Kong (SFC) announced on Monday that it had reprimanded and fined CES Capital International Co., Limited (CESHK) HKD 3.2 million over its failure to discharge its duties as an investment manager of two funds between February 2015 and July 2017.
According to the press release, CESHK did not perform adequate due diligence and monitoring of the funds' underlying investments and did not implement sufficient risk management measures to identify, quantify and manage the fund's risks. A proper audit trail of the due diligence and monitoring allegedly conducted on the funds and their underlying investments was also not maintained by CESHK.
In practice, CESHK failed to manage and invest the funds' assets and investments on a discretionary basis, as required by the SFC. It was instead up to the funds' directors to decide when to invest. In accordance with the investment objective stated in the private placement memorandum, CESHK was primarily responsible for making sure that the funds’ assets were invested substantially in UCs.
The SFC noted: “CESHK failed to produce any records of the regular meetings it claimed to have held with its asset management department to review the performance of the funds, and the monthly reports it prepared from May 2016 to March 2017 only set out some data and/or general market views without any accompanying analysis or explanation on their impact on the UCs and/or the funds.”
China Everbright Securities (HK) Limited Reprimand
Recently, the SFC reprimanded and fined China Everbright Securities (HK) Limited (CESL) HKD 3.8 million for failures in complying with anti-money laundering and counter-terrorist financing regulatory requirements.
According to the note, between January 2015 and February 2017, the SFC determined that CESL had not implemented adequate and effective systems as well as controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third-party deposits.
