2015 – CompliancePlus Consulting Limited

The PRP for the SFC is an independent panel established by the Chief Executive in November 2000. It is tasked to conduct reviews of operational procedures of the SFC and to determine whether the SFC has followed its internal procedures and operational guidelines to ensure consistency and fairness.

The PRP conducted a comprehensive review of 58 cases in 2014-2015 covering various divisions of the SFC. The SFC takes note of the observations and recommendations of the PRP, such as (1) issuing more guidelines to the industry through FAQ and to publicize its principles and criteria in handling individual applications concerning outside directorship, and (2) providing more detailed guidelines and training to the SFC staff to equip them with necessary knowledge on refusing non-compliant applications in SFC licensing in a timely manner, etc. The SFC looks forward to working with the PRP in the coming year.

For the full report, please refer to:

http://www.fstb.gov.hk/fsb/topical/doc/prereport14_e.pdf

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR105

2. SFC reprimands and fines Okasan International (Asia) Limited HK$4 million

On 2 November 2015, the SFC has reprimanded and fined Okasan International (Asia) Limited (“Okasan”) HK$4 million for failures in selling unlisted investment products and making proper disclosure of trading profits.

Background

An SFC investigation into Okasan’s practices and procedures in distributing unlisted investment products to its clients between January and September 2013 found that Okasan:

did not ensure adequate product due diligence had been conducted on the products before recommending them to clients;
did not ensure that recommendations and/or solicitations made to its clients in relation to the products were suitable for and reasonable in all the circumstances of the clients;
did not maintain adequate documentary records of the investment advice or recommendations given to its clients nor provide clients with a copy of the written advice; and
failed to make adequate disclosure to clients of the trading profits it made from back-to-back transactions

In determining the penalty, the SFC took into account that Okasan:

co-operated in resolving the disciplinary proceedings;
has agreed to conduct an independent review of its systems and controls in respect of its distribution of unlisted investment products and to enhance its complaint handling procedures; and
has an otherwise clean disciplinary record in relation to its regulated activities.

Comment

Readers should note that under paragraph 8.3 of the Code of Conduct, where a licensed person enters into a back-to-back transaction concerning an investment product, the licensed person should disclose to the client the trading profit to be made as a percentage ceiling of the investment amount or the dollar equivalent. Licensed corporations should regularly review its trading and disclosure process to ensure compliance.

For a copy of the statement of disciplinary action, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/openAppendix?refNo=15PR104&appendix=0

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR104

3. Market Misconduct Tribunal dismisses application by Andrew Left of Citron Research

On 2 November 2015, the Market Misconduct Tribunal (“MMT”) has dismissed an application by Mr Andrew Left (“Left”) of Citron Research for an order for the production of documents relating to the financial position of Evergrande Real Estate Group Limited (“Evergrande”), or for a stay of the MMT proceedings commenced by the SFC in relation to a research report on Evergrande published in 2012. The MMT also ordered Left to pay the SFC’s cost in relation to this application

Background

The SFC commenced proceedings in the MMT in December 2014 against Left alleging that a report he published on 21 June 2012 on Citron Research’s website contained false or misleading information about Evergrande. The report stated, among other things, that Evergrande was insolvent and had consistently presented fraudulent information to the investing public.

Left argued that to determine whether the report contained false or misleading information, the MMT had to enquire into Evergrande’s financial position which required a review of its records and documents. Left made an application to the MMT on 17 September 2015 for an order for production of documents, or for a stay of proceedings.

In dismissing the application, Chairman of the MMT, the Honourable Mr Justice Hartmann, agreed with the SFC’s view that at the time when Left compiled the report, the only information available to him was information in the public domain.

The Chairman noted that the SFC is therefore obliged to present its case on the basis of that information just as Left is obliged to do so.

Comment

Pursuant to Section 277 of the Securities and Futures Ordinance (“SFO”), a person shall be regarded as having engaged in market misconduct if he discloses, circulates or disseminates false or misleading information as to a material fact which is likely to induce another person to deal in securities in Hong Kong, knowing that, or is reckless or negligent as to whether, the information is false or misleading as to a material fact, or is false or misleading through the omission of a material fact. By publishing false and misleading information in the public domain, Left is alleged to have committed market misconduct within the meaning of Section 277 of SFO.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR106

4. SFC obtains court order to freeze HK$23.5 million assets of Maxim Capital Limited

On 10 November 2015, the Court of First Instance has granted various interim orders against Maxim Capital Limited (“Maxim Capital”), an unlicensed investment firm, including freezing all its monies in Hong Kong totalling approximately HK$23.5 million following legal proceedings brought by the SFC under section 213 of the SFO.

Interim orders were also granted on 6 November 2015 to restrain Maxim Capital from holding out as carrying on regulated activities whilst unlicensed and to suspend its websites that have been promoting the carrying out of regulated activities under the brand name “Maxim Trader”.

Background

The SFC’s investigation found that Maxim Capital and Maxim Trader have solicited over 130 investors to invest more than HK$111 million in a number of investment schemes since 2013 that claimed to pay monthly returns from 3% to 8%.

Whilst the investors were initially able to receive monthly returns on their investments, they have not received further monthly returns since July 2015 and were informed by Maxim Capital/Maxim Trader that their investments had been converted into shares of a company which appear to the SFC to be worthless.

The SFC alleges that Maxim Capital and Maxim Trader have contravened the SFO by holding out as carrying on a business in SFC regulated activities in Hong Kong without an SFC licence and issuing related advertisements.

The SFC also alleges that Maxim Capital and Maxim Trader have contravened the SFO by issuing advertisements which invite the public to enter into agreements to acquire interests in a collective investment scheme without SFC’s authorization. Maxim Capital and Maxim Trader made various fraudulent or reckless misrepresentations, including the claim that Maxim Capital was a financial service provider licensed in New Zealand and regulated in Belize.

On 27 October 2015, the SFC commenced proceedings under section 213 of the SFO seeking various final orders against Maxim Capital and Maxim Trader, including injunctive relief and restitutionary orders requiring them to restore the affected investors to their pre-transaction positions. Pending the substantive determination of the SFC’s claims, the SFC also applied on the same day for various interlocutory injunction orders.

The SFC has identified approximately HK$23.5 million held in an account maintained by Maxim Capital with a licensed money service operator in Hong Kong. Those funds are now frozen under the terms of the interim injunction order. This order will remain in force until the trial of these proceedings, the date of which has yet to be fixed.

The SFC’s investigation is continuing.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR108

5. Licence applicant convicted of providing false information to SFC

On 12 November 2015, the Eastern Magistracy convicted Mr Lee Kwok Wah (“Lee”) of making false or misleading representations in his two licence applications to the SFC.

Background

Lee was fined HK$15,000 and also ordered to pay the SFC’s investigation costs.

The SFC found that, in April and September 2014, Lee concealed from the SFC his previous criminal convictions in two licence applications.

The SFC expects applicants to make full and accurate disclosure of all information required to be submitted with a licence application. Failure of applicants to do so might affect their fitness and properness to be licensed.

Comment

Pursuant to section 383 of the SFO, applicants are required to disclose all prior criminal convictions, disciplinary sanctions in relation to any trade, business or profession and whether they have been investigated by a local or foreign regulatory or criminal investigatory body. Lee’s failure to make full and accurate disclosure of all information required in a licence application might affect his fitness and properness to be licenced. Applicants need to be cautious in providing information in their licence applications to the SFC to ensure the information is accurate and not misleading.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR111

6. SFC moves to paperless individual licences

On 13 November 2015, the SFC announces that it will no longer issue printed licences to individual licensees with effect on that day, when the Securities and Futures (Amendment) Ordinance 2015 came into operation.

Background

Previously, new printed licences were issued whenever there was any change in an individual’s licensing particulars, such as a change in principal, type of regulated activity or licensing conditions. The move to paperless individual licenses will reduce the industry’s compliance burden and help protect the environment.

Investors are encouraged to check the register when considering using the services of licensed individuals and intermediaries.

In addition, investors can find information on choosing and dealing with licensed individuals and intermediaries on the website of the Investor Education Centre:

http://www.hkiec.hk/web/en/index.html

For details of licenced individuals, please refer to the SFC’s online Public Register of Licensed Persons and Registered Institutions :

http://www.sfc.hk/web/EN/regulatory-functions/intermediaries/licensing/register-of-licensees-and-registered-institutions.html

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR110

7. SFC bans Gong Yueyue for 15 years

On 16 November 2015, the SFC has banned Mr Gong Yueyue (“Gong”), a former licensed representative, from re-entering the industry for 15 years following his conviction by the Eastern Magistrates’ Court on 25 February 2015 for an offence of bribery.

Background

The Court found that, in March 2014, Gong accepted HK$100,000 for the publication of a research report on a listed company. The target share price proposed by the research report was not an independent and fair assessment of the listed company.

In late 2013, a third party asked Gong to prepare a research report on the listed company. Draft reports were prepared by Gong and after they were shown to the management of the listed company, the third party indicated to Gong that the target share price should be revised upwards. On the day the research report with the revised target share price was published, Gong received HK$100,000 from the third party. Gong was sentenced to imprisonment of one year.

Comment

Section 9(1) (a) of the Prevention of Bribery Ordinance (Cap.201) (“PBO”) provides that any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business, shall be guilty of an offence.

In this case, by accepting a bribe of HK$100,000 for publishing a research report on a listed company in which the information of the report was not based on an independent and fair assessment, Gong is found guilty in contrary to Section 9(1)(a) of PBO.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR112

8. SFC proposes changes to the ATS Guidelines

On 20 November 2015, SFC released a consultation paper on proposed changes to update the Guidelines for the Regulation of Automated Trading Services.

Background

The proposals reflect regulatory and market developments and mainly cover the implementation of the regulation of over-the-counter (“OTC”) derivative transactions, setting out more specific requirements for central counterparties that wish to provide clearing services for OTC derivative transactions. They also align the guidelines with international standards and practices and codify existing practices.

“The proposed amendments are necessary to keep pace with market developments,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “They will also help prepare for the implementation of mandatory clearing, which is part of the new OTC derivatives regime.”

Following the consultation, the SFC plans to implement the revised ATS Guidelines at the same time as the implementation of the subsidiary legislation for mandatory clearing obligation for OTC derivatives transactions, which is expected to be in mid-2016.

The public is invited to submit their comments to the SFC by 31 December 2015. Written comments may be sent online via SFC website (https://www.sfc.hk/edistributionWeb/gateway/EN/consultation/comment?refNo=15CP5),
by email to [email protected], by post or by fax to +852 2521 7917.

For details of consultation paper, please refer to:

https://www.sfc.hk/edistributionWeb/gateway/EN/consultation/comment?refNo=15CP5

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR113

The article is for general information purpose only and is not intended to constitute legal or other professional advice.

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CompliancePlus Supporting White Doves, a NGO in Cambodia, in the Past Two Years

November 30, 2015/in Press Release /by Tony Chan

Press Release – CompliancePlus Supporting White Doves in the Past Two Years (30 November 2015)

Regulatory News (Nov 2015)

November 6, 2015/in Regulatory News /by Tony Chan

Newsletter – October 2015

November 6, 2015/in Newsletter /by Tony Chan

Content

Joint HKMA-SFC consultation on mandatory clearing and reporting for OTC derivatives market
SFC obtains disqualification orders against former chairmen and chief executive officer of First China Financial Network Limited
SFC bans Wong Chun for eight years over false trading
SFC launches pilot initiatives to enhance fund authorization process
SFC bans Chan Chi Yuen for 18 months
SFC bans Masashi Yonezawa for 30 months
SFC bans Ko Shu Chuan for six years
SFC bans Wong Sze Yiu for six months

1. Joint HKMA-SFC consultation on mandatory clearing and reporting for OTC derivatives market

On 30 September 2015, the Hong Kong Monetary Authority (“HKMA”) and the Securities and Futures Commission (“SFC”) jointly issued a consultation on introducing the first phase of mandatory clearing and the second phase of mandatory reporting under the new over-the-counter (“OTC”) derivatives regime.

Background

The joint consultation paper aims to consult the market on: (1) introducing mandatory central clearing to mandate the clearing of certain standardised interest rate swaps entered into between major dealers; and (2) expanding the existing mandatory reporting regime so that it covers all OTC derivatives, and requires the reporting of certain additional transaction information.

The first phase of mandatory clearing aims to mandate the clearing of certain standardised interest rate swaps entered into between major dealers. The key proposals identify: (1) the types of transactions that will be subject to mandatory clearing; (2) the persons who will be subject to the clearing obligation and in what circumstances; (3) the exemptions and reliefs that may apply and (4) the process for designating central counterparties for the purposes of the clearing obligation

The second phase of mandatory reporting aims to expand the existing reporting regime. Our key proposals include requiring the reporting of transactions in all OTC derivative products, widening the scope of transaction information to be reported, including requiring the reporting of daily valuations and identifying the specific data fields to be completed under the expanded reporting regime.

Interested parties are invited to submit comments to the HKMA or the SFC by:

31 October 2015 in respect of matters other than the proposed data fields, and
30 November 2015 in respect of the proposed data fields.

To submit comments, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/consultation/doc?refNo=15CP4

For a copy of the abovementioned joint consultation paper, please visit:

http://www.sfc.hk/edistributionWeb/gateway/EN/consultation/openFile?refNo=15CP4

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR90

2. SFC obtains disqualification orders against former chairmen and chief executive officer of First China Financial Network Limited

On 2 October 2015, the SFC obtained disqualification orders in the Court of First Instance (the “Court”) against three former directors of First China Financial Network Holdings Ltd (“First China”): Mr Wang Wenming (“Mr Wang”), former Chairman, Mr Lee Yiu Sun (“Mr Lee”), former Chief Executive Officer, and Mr Richard Yin Yingneng (“Mr Yin”), Mr Wang’s predecessor.

Background

Mr Wang, Mr Lee and Mr Yin have been disqualified from being a director or being involved in the management of any listed or unlisted corporation in Hong Kong, without leave of the Court, for seven, five, and four years respectively. The disqualification order made against Mr Wang and Mr Lee took effect on 21 October 2015. The disqualification order made against Mr Yin took effect on 30 September 2015.

The SFC alleged that Mr Wang, Mr Lee and Mr Yin dishonestly breached their duties to First China by either concocting or lending support for the concoction of a non-existent oral agreement called the mutual understanding and agreement (“MUA”) that purportedly required First China to distribute a dividend of RMB18,692,000 to Fame Treasure Ltd, the seller of a company acquired by First China in 2007, which Mr Wang was a majority shareholder.

The Court made the disqualification orders after finding that the MUA was a concoction and that the clarification announcement issued by First China on 16 December 2008 which stated that the MUA requiring the distribution was false or misleading in a material particular.

Earlier this year the Court ordered that Mr Wang, Mr Lee and Mr Yin to repay First China a total sum of RMB18,692,000, being the amount they caused First China to distribute to Fame Treasure Limited on the basis that the MUA existed. First China has received this money from Mr Wang.

Comment

Under section 214 of the Securities and Futures Ordinance (“SFO”), the SFC can apply to the Court by petition for an order if it appears that corporation had conducted its business or affairs in a manner involving defalcation, fraud or other misconduct. Upon conviction, the Court may make orders disqualifying a person from being a company director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR93

3. SFC bans Wong Chun for eight years over false trading

On 8 October 2015, the SFC has banned Mr Wong Chun (“Mr Wong”), a former licensed representative, from re-entering the industry for eight years following his earlier conviction and sentencing for false trading in the shares of Sino-Tech International Holdings Limited (“Sino-Tech”).

Background

Between December 2010 and January 2011, Mr Wong created a false or misleading appearance of active trading in shares of Sino-Tech, using matched trades and some wash trades between his own account and the accounts of two other investors he was able to control to grossly inflate trading volume by more than 400%. As a result, the securities accounts controlled by Wong were able to off-load more than 200 million shares, making a gross profit of more than $2 million that he would otherwise not be able to do so.

Comment

Market manipulation commonly includes the release of false or misleading information; the taking up of wash sales from one another within a certain trading period to increase the turnover of the stock or distort the actual share price; the placing of purchase orders at slightly higher prices or sale orders at lower prices to drive up or suppress the price of the securities when the market just opened (marking the open) and the drying up of stocks supply to exert undue upward price pressure on the stocks (cornering shares).

False trading takes place when a person does anything or causes anything to be done with the intention to create a false or misleading appearance of active trading in securities or futures contracts traded on a relevant recognized market, or by means of authorized automated trading services.

Readers should note that false trading is a form of market manipulation. It is a criminal offence and is a category of market misconduct under the SFO subject to severe punishment. Any SFC licensee found to have taken part in market manipulation may have their license suspended or revoked.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR95

4. SFC launches pilot initiatives to enhance fund authorization process

On 9 October 2015, the SFC announced the launch of new initiatives to further enhance the authorization process for new fund applications (“Revamped Process”) and for new Mandatory Provident Funds (“MPF”) and Pooled Retirement Fund (“PRF”) products.

Background on Revamped Process initiative

Both initiatives will be implemented on 9 November 2015 for a six-month pilot period after which refinements may be made before the initiatives will be adopted as policy.

Under the Revamped Process, new fund applications will be bifurcated into two streams, namely “Standard Applications” and “Non-standard Applications”, with a view to promoting fund providers’ self-compliance and reducing the overall processing time without compromising investor protection. Under this approach, “Standard Applications” will be fast-tracked with an aim that SFC authorization (if granted) will be given on average between one to two months from the take-up date of the applications. “Non-standard Applications” will be processed under an enhanced process with an aim that SFC authorization (if granted) will be given on average within two to three months from the take-up date of the applications.

In formulating the Revamped Process, advice from a technical working group comprising industry stakeholders had been taken into account in devising a set of minimum disclosure requirements for offering documents and compiling a streamlined New Information Checklist.

“An authorization process that is more efficient and focuses more on key risks can meet the fund providers’ wish to reduce the ‘time to market’ of their funds for public offering,” the SFC’s Executive Director of Investment Products, Ms. Julia Leung said. “To achieve this, we need applicants to provide proper and quality submissions at the time of application and throughout the application process in a timely manner,” she added.

For further background information and details on the Revamped Process to be adopted by the SFC in processing new fund applications and the associated transitional arrangements, please refer to the SFC’s circular dated 9 October 2015 entitled “Launch of pilot revamped fund authorization process”:

http://www.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=15EC49.

Readers should note there are also important links to the new minimum disclosure requirements for offering documents, the streamlined New Information Checklist and the Frequently Asked Questions on the Revamped Process within the abovementioned circular.

Requirements for Offering Documents:

http://www.sfc.hk/web/EN/files/PCIP/FAQ/Guide_for_UT_MF_Applications.pdf

Information Checklist:

http://www.sfc.hk/web/EN/forms/products/forms.html

Frequently Asked Questions:

http://www.sfc.hk/web/EN/faqs/product-authorization/application-procedures-for-authorization-of-unit-trusts-and-mutual-funds-revamped-process.html

Background on MPF and PRF initiative

Separately, a six-month application lapse policy will be applied to applications for new MPF and PRF products seeking SFC authorization following consultations with the Mandatory Provident Fund Schemes Authority (“MPFA”) and key industry stakeholders. This will bring the authorization process of these products in line with the six-month application lapse period currently applied to other SFC-authorized investment products in order to enhance the overall efficiency of the authorization process.

For further details regarding the six-month application lapse policy to be applied to MPF and PRF products, please refer to SFC’s circular dated 9 October 2015 entitled “Application lapse policy”:

http://www.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=15EC50.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR96

5. SFC bans Chan Chi Yuen for 18 months

On 13 October 2015, the SFC banned Mr Chan Chi Yuen (“Mr Chan”) from re-entering the industry for 18 months from 9 October 2015 to 8 April 2017.

Background

The disciplinary action follows Mr Chan’s conviction in 2013 for illegal short selling. The SFC found that Mr Chan also concealed his beneficial interest and personal trades conducted in his wife’s account from the licensed corporation that he was accredited to, including his illegal short selling activities. In addition, he failed to disclose the accounts of his wife and two sisters maintained with the licensed corporation between 2008 and 2011. His conduct was in breach of the internal policy of the licensed corporation.

As a result of Mr Chan’s concealment, he was able to circumvent the licensed corporation’s monitoring of the trades conducted by him in his wife’s account, making it impossible for the licensed corporation to detect his illegal short selling activities.

The SFC concluded that Mr Chan was guilty of misconduct, calling into question his fitness and properness as a licensed person. In determining the penalty, the SFC took into account all the circumstances, including Chan’s conduct was dishonest and intentional, his guilty plea to illegal short selling and the resulting fine imposed on him.

Comment

The implementation of the internal policy on employee trading is a regulatory requirement imposed on licensed corporations under paragraph 12.2 of the Code of Conduct for Persons Licensed by or Registered with the SFC (the “Code of Conduct”). Licensed corporations are also obliged to actively monitor the trading activities in their employees’ accounts and their related accounts in order to detect any potential conflict of interest and/or other malpractices arising from the employees’ trading activities.

General Principle 1 of the Code of Conduct requires all licensed persons to act honestly, fairly, and in the best interests of their clients and the integrity of the market when conducting their business activities. In so far as personal trading is concerned, employees of licensed corporations (including licensed representatives) should follow the employee dealing procedures of their employers because a failure to honour those controls will not only breach the internal policies of their employers but also prevent them from monitoring personal trading of their employees, which is important for the prevention and identification of potential market misconduct. As such, an employee does not follow the employee dealing procedures of their employers could call into question the person’s fitness and properness to remain licensed and could lead to suspension or revocation of a SFC license.

For a copy of the statement of disciplinary action, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/openAppendix?refNo=15PR94&appendix=0

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR94

6. SFC bans Masashi Yonezawa for 30 months

On 14 October 2015, the SFC banned Mr Masashi Yonezawa (“Mr Yonezawa”), a former trader at Nomura International (Hong Kong) Limited (“Nomura Hong Kong”), from re-entering the industry for 30 months.

Background

The disciplinary action follows an SFC investigation which found that Mr Yonezawa, a trader on Nomura Hong Kong’s Delta One trading desk, made false entries in Nomura Hong Kong’s risk management system on three separate days between March and May 2013 to conceal the real risk exposure of his trades.

Mr Yonezawa, who was on secondment from Nomura Securities Co., Ltd in Japan at the material time, also made misrepresentations to his supervisors and the management of Nomura Hong Kong when he explained the trading losses resulting from his trades to them. As a result, Mr Yonezawa’s conduct prevented Nomura Hong Kong from effectively monitoring the trading activities of its Delta One trading desk.
In deciding the disciplinary action, the SFC has taken into account all relevant circumstances, including Mr Yonezawa’s conduct was deliberate and dishonest, and his remorsefulness for the misconduct.

Comment

Section 129 of the SFO provides that, in considering whether a person is fit and proper, the SFC may consider, in addition to any other matter that the SFC may consider relevant, the person’s ability to carry on the regulated activity competently, honestly and fairly, and the reputation, character, reliability and financial integrity of the person.

In this case, Mr Yonezawa’s conduct in making fictitious entries in Euclid in order to conceal the real risk exposure resulting from his trading activities was deliberate and dishonest. His action prevented Nomura Hong Kong from monitoring the trading activities of its Delta One trading desk. Mr Yonezawa’s dishonesty is further exemplified by the fact that he misled his supervisors about his trading activities in order to prevent them from discovering his speculative trading. The dishonest nature of his conduct also demonstrates that he presents a risk to confidence in the financial market

For a copy of the statement of disciplinary action, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/openAppendix?refNo=15PR99&appendix=0

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR99

7. SFC bans Ko Shu Chuan for six years

On 15 October 2015, the SFC banned Ms Ko Shu Chuan (“Ms Ko) from re-entering the industry for six years from 15 October 2015 to 14 October 2021.

Background

The disciplinary action follows an SFC investigation which found that Ms Ko, a former vice president of DBS Bank (Hong Kong) Limited (DBSHK), fabricated a Bachelor of Economics degree certificate purportedly issued by Tamkang University in Taiwan. Ko made false representations about her academic qualifications and provided a fake degree certificate to DBSHK for the purpose of obtaining employment in 2012.

Ms Ko was subsequently dismissed by DBSHK after admitting that the degree certificate was fake and that she fabricated it using her sister’s certificate.

The SFC considers Ms Ko’s conduct to be plainly dishonest and it casts serious doubts on her competency, character and reliability as a licensed person. The SFC has reported Ms Ko’s conduct to the Police.

Comment

Section 129 of the SFO provides that, in considering whether a person is fit and proper, the SFC may consider, in addition to any other matter that the SFC may consider relevant, the person’s ability to carry on the regulated activity competently, honestly and his/her character and reliability. Ms. Ko’s conduct in misrepresenting her educational qualifications and fabricating and providing a fake degree certificate to her employer was plainly dishonest and call into question her fitness and properness to be a regulated person.

For a copy of the statement of disciplinary action, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/openAppendix?refNo=15PR100&appendix=0

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR100

8. SFC bans Wong Sze Yiu for six months

On 26 October 2015, the SFC has banned Mr Wong Sze Yiu, a former account executive of Core Pacific-Yamaichi International (H.K.) Limited (“CPYI”), from re-entering the industry for six months from 26 October 2015 to 25 April 2016 for failures in relation to managing a client’s account on a discretionary basis.

Background

The disciplinary action follows an investigation by the SFC which found that, from around February or March 2012 until September 2014, Wong conducted discretionary trading in a client’s account without obtaining her written authorization, and without the knowledge and approval of his employer.

Although the client verbally authorized Wong to trade in her account on a discretionary basis, the absence of written authorization prevented monitoring and supervision by Wong’s employer. The SFC considers that Wong’s conduct resulted in non-compliance with the regulatory requirements on the authorization and operation of a discretionary account under the Code of Conduct.

In deciding the sanction, the SFC took into account that Wong’s misconduct lasted for two and a half years, his clean disciplinary record and his cooperation with the SFC.

Comment

Under the Code of Conduct, a discretionary account is defined as client account in respect of which the client has authorized the licensed or registered person or any person employed by it (who must in turn be a licensed or registered person) to effect transactions on behalf of the account without the client’s prior approval for each transaction. The discretion may be absolute or subject to conditions.

Readers should take note that the Code of Conduct imposes the following requirements on the establishment and operation of discretionary accounts:

the client’s authority must be in writing;
the authority should specify the person who is authorized to operate the account, stating that the person is an employee or agent of the licensed or registered person, if the authority is granted to such person;
the terms of the authority should be explained by the licensed or registered person or a person employed by it to the client if the authority is given to such persons to operate the account;
the authority should be confirmed annually by the licensed or registered person with the client – for this purpose, it is permissible for the licensed or registered person to notify the client before the expiry date that it will be automatically renewed unless the client specifically revokes it before the expiry date;
the account should be designated as a discretionary account;
senior management should approve the opening of the account; and
internal control systems should be installed to ensure that the operation of the account is properly supervised.

For a copy of the statement of disciplinary action, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/openAppendix?refNo=15PR102&appendix=0

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR102

The article is for general information purpose only and is not intended to constitute legal or other professional advice.

Receipt of this newsletter indicates that CompliancePlus has been using your email address to market to you the compliance services that CompliancePlus is able to provide you.

CompliancePlus provides compliance consulting services to financial companies, hedge fund managers and individuals. Our dedicated team of compliance officers has years of professional experience equipped with in-depth knowledge of both functional and compliance experience in managing and minimizing regulatory, operational and reputational risks. By partnering with CompliancePlus, our clients gain access to compliance solutions that they can trust and the latest knowledge of regulatory policies and procedures.

For enquiries, please email: [email protected] or call at +852-3487 6903.
To subscribe, update your email address or unsubscribe, please email [email protected]

Newsletter – September 2015

October 13, 2015/in Newsletter /by Tony Chan

Content

SFC’s Interim Head of Enforcement
Notice to compensation claimants
Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Terrorist Financing: (1) United Nations (Anti-Terrorism Measures) Ordinance; (2) US President’s Executive Order 13224
Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Terrorist Financing United Nations (Anti-Terrorism Measures) Ordinance

1. SFC’s Interim Head of Enforcement

On 18 September 2015, the Securities and Futures Commission (“SFC”) has appointed Ms Maureen Garrett (“Ms Garrett”), Deputy Chief Counsel of the SFC, as Interim Head of Enforcement.

Background

Ms Garrett will oversee the Enforcement Division pending the completion of a global recruitment exercise to replace Mr Mark Steward who will leave the SFC to take up a similar position with the UK’s Financial Conduct Authority.

She joined the Legal Services Division of the SFC in 1999. She has deep experience leading the SFC’s enforcement litigation work in Hong Kong’s courts and tribunals and in that capacity has worked closely with the Enforcement Division over many years.

Mr Ashley Alder, the SFC’s Chief Executive Officer, said: “Maureen’s interim appointment will ensure that our enforcement work will continue to operate at full strength pending the appointment of a permanent replacement for Mark.”

For details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR89

2. Notice to compensation claimants

On 23 September 2015, the SFC issues a notice to investors who were counterparties of convicted futures trader Mr Tsoi Bun (“Mr Tsoi”) but have not come forward to receive compensation under an order made by the Court.

Background

Mr Tsoi was convicted of false trading and/or price rigging on the futures market. In 2014 he was ordered to pay over HK$13 million into the Court to compensate each of the counterparties to his false trading and/or price rigging.

Despite attempts by the Administrators to locate all counterparties, 207 investors have not come forward and about HK$4.6 million remains unclaimed.

These counterparties are advised to follow the steps set out in the notice if they wish to receive compensation. The notice can be found at
http://www.sfc.hk/web/EN/files/ER/PDF/Final%20notice%20to%20compensation%20claimants%20Tsoi%20Bun%20PR_20150923_final.pdf

For details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR88

3. Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Terrorist Financing: (1) United Nations (Anti-Terrorism Measures) Ordinance; (2) US President’s Executive Order 13224

(1) United Nations (Anti-Terrorism Measures) Ordinance

Further to the circular issued on 28 August 2015 (http://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=15EC46), an updated list specifying terrorists and terrorist associates designated by the United Nations Security Council (“UNSC”) was published under section 4 of the United Nations (Anti-Terrorism Measures) Ordinance (“the UNATMO”) (Cap. 575) in the Gazette on 11 September 2015 (G.N. 6853 of 2015). The UNSC has issued a relevant press release reflecting the updates, which can be found on the SFC website (http://www.sfc.hk/edistributionWeb/gateway/EN/circular/openAppendix?refNo=15EC47&appendix=0).

The aforesaid list can be found on the Government’s website (http://www.gld.gov.hk/egazette/)

(2) US President’s Executive Order 13224

Further to our circular issued on 28 August 2015, this is to inform you that the US Government has updated the list of designated individuals and entities issued under the US President’s Executive Order 13224 (“the Executive Order”). The updated information can be found on the website of the US Treasury (http://www.treasury.gov/resource-center/sanctions/Programs/Documents/terror.pdf) under the headings of “Name of entity removed on 9-3-15”, “Names of individuals added on 9-8-15”, “Name of individual added on 9-9-15”, “Name of entity added on 9-10-15” and “Names of individuals added on 9-10-15”. As the designated individuals and entities under the Executive Order may be updated by the US Government from time to time, licensed corporations (“LCs”) and associated entities (“AEs”) are reminded to browse the website of the US Treasury regularly for the latest information.

LCs and AEs should check the names in the above list against their records, and report any transactions or relationships they have or have had with the named persons or entities to the Joint Financial Intelligence Unit.

Furthermore, LCs and AEs are reminded to refer to Chapter 6 of the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (“AML Guideline”) which contains guidance on the appropriate measures that LCs and AEs should take to ensure compliance with the UNATMO and the Executive Order.

Queries regarding the contents of this circular should be forwarded to Ms Kiki Wong at 2231 1569
For details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=15EC47

4. Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Terrorist Financing United Nations (Anti-Terrorism Measures) Ordinance

United Nations (Anti-Terrorism Measures) Ordinance

Further to our circular issued on 11 September 2015, an updated list specifying terrorists and terrorist associates designated by the United Nations Security Council (“UNSC”) was published under section 4 of the United Nations (Anti-Terrorism Measures) Ordinance (“the UNATMO”) (Cap. 575) in the Gazette on 18 September 2015 (G.N. 7002 of 2015). A relevant press release issued by the UNSC, reflecting the updates since the previous list was published in the Gazette (G.N. 6853 of 2015).

The aforesaid list can be found on the Government’s website (http://www.gld.gov.hk/egazette/).

For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=15EC48

The article is for general information purpose only and is not intended to constitute legal or other professional advice.

Receipt of this newsletter indicates that CompliancePlus has been using your email address to market to you the compliance services that CompliancePlus is able to provide you.

CompliancePlus provides compliance consulting services to financial companies, hedge fund managers and individuals. Our dedicated team of compliance officers has years of professional experience equipped with in-depth knowledge of both functional and compliance experience in managing and minimizing regulatory, operational and reputational risks. By partnering with CompliancePlus, our clients gain access to compliance solutions that they can trust and the latest knowledge of regulatory policies and procedures.

For enquiries, please email: [email protected] or call at +852- 3487 6903.
To subscribe, update your email address or unsubscribe, please email [email protected]

Regulatory News (Oct 2015)

October 13, 2015/in Regulatory News /by Tony Chan

Funds of CompliancePlus’ clients among the first batch of funds approved under the Mutual Recognition of Funds scheme

HKEJ front page interview on PRC-HK Mutual Recognition of Funds

Regulatory News (Dec 2015)

Over 200 participants attended the CompliancePlus 2015 Annual Compliance Training on Dec 11

CompliancePlus Supporting White Doves, a NGO in Cambodia, in the Past Two Years

Regulatory News (Nov 2015)

Regulatory News (Oct 2015)

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