Newsletter – August 2014
Newsletter – August 2014
- SFC bans Manesh Vijaykumar Samtani for life
- SFC bans former broker Chan Yuk Hing for three years for false trading
- Market manipulator fined and sentenced to community service
- SFC suspends Chan Hung Nin for 15 months for unauthorised trading in client’s account
- SFC reprimands and fines Winnie Pang Wai Yan for negligence in handling client’s trade orders
- SFC commences Market Misconduct Tribunal proceedings against former CEO of Water Oasis Group Limited for alleged insider dealing
- SFC reprimands and fines Hung Lai Ping for manager and supervisory failures
- SFC issues first-quarter report
- SFC issues supplemental consultation conclusions on regulation of IPO sponsors
- Roger Tsui Chi Fung banned for providing false information to SFC
1. SFC bans Manesh Vijaykumar Samtani for life
On 4 August 2014, the Securities and Futures Commission (“SFC”) banned Mr. Manesh Vijaykumar Samtani from re-entering the industry for life.
Background
Mr. Samtani was licensed as a representative to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts) and Type 4 (advising on securities) regulated activities under the Securities and Futures Ordinance (“SFO”) and was accredited to KGI Asia Limited from 20 March 2008 to 28 November 2012 and to KGI Futures (Hong Kong) Limited from 11 August 2008 to 28 November 2012. Mr. Samtani is currently not a licensed person.
According to the findings of SFC, from July 2011 to November 2012, Mr. Samtani provided six clients with false screenshots of KGI’s trading platform and other false information to conceal trading losses and mislead the clients on the transactions conducted in their accounts and their actual account balances. The SFC also found that Mr. Samtani failed to follow his client’s specific instructions on the handling of their accounts and conducted transactions in their accounts contrary to their express instructions without their authorization.
Disciplinary action
Mr. Samtani provided false screenshots and other false information to the clients of his then employers, KGI, to mislead them as to the transactions in their accounts and the true net asset value of their accounts, in breach of the General Principle 1 of the Code of Conduct (honesty and fairness).
As regards conducting unauthorised transactions in the clients’ accounts, Mr. Samtani was in breach of paragraph 7.1 of the Code of Conduct (authorisation and operation of a discretionary account).
The SFC decides that Mr. Samtani is not a fit and proper person as a result of his misconducts; specifically the SFC took into account that Mr. Samtani’s conduct was dishonest, that he had abused the trust and confidence his clients and employers placed in him, and that his actions seriously jeopardised his clients’ interests and resulted in financial losses of more than HK$8 million to the clients.
Comment
Readers are once again reminded that a licensed person is under a duty to abide by the General Principles of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct). Paragraph 7.1 of the Fit and Proper Guidelines provides that a person may not be fit and proper if that person was found to be of poor reputation, character or reliability, lacking in financial integrity, or dishonest, which may be evidenced by that person’s being found by a court for fraud, dishonesty, misfeasance or other market-related crimes, or even by the SFC’s findings in the absence of an unfavourable court’s finding.
Readers should take note that safe custody of client assets is a fundamental obligation of licensed corporations. It is also the duty of a licensed person to abide by the Code of Conduct. A licensed person should exercise due skill, care and diligence and to act in the best interests of its clients. The SFC also reminds against the disclosure of passwords to the online trading accounts to anyone.
For details, please refer to the SFC articles:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR96
2. SFC bans former broker Chan Yuk Hing for three years for false trading
On 4 August 2014, the SFC banned Mr. Chan Yuk Hing, a former broker, from re-entering the industry for three years from 1 August 2014 to 31 July 2017.
Background
On 29 June 2012, the Eastern Magistrates Court found Chan and his client, Mr. Paul Frederic Chane Yin, guilty of market manipulation in shares of Multifield International Holdings Limited (Multifield) in 2009. An SFC investigation found that through Chan, Chane purchased 50,000 Multifield shares at an average price of HK$0.2261 in the morning trading session of 23 November 2009. However, during the afternoon session, Chan asked Chane to buy Multifield shares at the best ask price which was HK$1.00 per share, four times the prevailing market price of HK$0.25, and suggested Chane to buy a single board lot of 2,000 shares. Chane agreed, and as a result, the price of Multifield shares rose four-fold to HK$1.00. Shortly before trading closed that day, Chane sold the 50,000 shares he had bought at an average price of HK$0.2261 for an average selling price of HK$0.4258.
Court Ruling
The Court held that there was no economically sensible reason for Chane to buy a single board lot at a price of four times the prevailing price. Therefore, it found that both Chan and Chane intended to create a false or misleading appearance of the price for Multifield shares to enable Chane to later sell his shares at an artificially inflated price.
On 13 July 2012, the Eastern Magistracy sentenced Chan and Chane to serve 80 hours and 100 hours of Community Service respectively. Chane was also fined HK$8,000, and both were ordered to pay investigation costs to the SFC. Subsequently, Chan and Chane’s appeals against their convictions were both dismissed in the Court of First Instance (“CFI”) on 13 January 2014.
The Ban
Consequently, the SFC has concluded that Chan has been guilty of misconduct and thus not fit and proper to be licensed. He was previously licensed under the SFO to carry on Type 1 (dealing in securities) regulated activity, and was accredited to KGI Asia Limited between January 2008 and August 2010.
Comment
Readers should take note that a genuine buyer in a market of genuine supply and demand is one who aims to purchase shares at the lowest possible price. By doing otherwise, their conduct would constitute false trading contrary to Section 295(1)(b) of the Securities and Futures Ordinance (“SFO”). This calls his or her fitness and properness into question, and could lead to his or her license being suspended.
For details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR95
3. Market manipulator fined and sentenced to community service
On 7 August 2014, the Eastern Magistrates’ Court sentenced Mr. Wong Pok Wang to 180 hours of community service and fined him HK$16,320 for manipulating the indicative equilibrium price (“IEP”) of derivative warrants and callable bull/bear contracts (“CBBCs”) during the Pre-opening Sessions.
Background
On 22 July 2014, the Eastern Magistrates’ Court found Wong guilty of 13 counts of false trading in eight derivative warrants and CBBCs between 15 October 2010 and 14 February 2011, following an allegation by the SFC. The SFC alleged that Wong created price ranges for the final IEP for the aforementioned derivative warrants and CBBCs by placing high priced at-auction limit buy orders of small sizes (usually a single board lot) and low priced at-auction limit sell orders (of significant sizes) during the Order Input Period. An IEP is the price during the Pre-opening Sessions at which the maximum number of shares could be traded if order matching occurred at the same time, and is calculated and determined by the orders inputted by investors during the Pre-opening Sessions. Within five seconds before the close of the Pre-order Matching Period, Wong placed at-auction buy orders (of relatively large sizes) for derivative warrants or CBBCs, pushing the final IEPs to the upper end of the price range by 9% to 39% on nine occasions. In this way, Wong sold the derivative warrants and CBBCs on a net basis at prices that were artificially high and profited from the trades. The Court held that Wong’s order placing activities made no economic sense and that he obtained illicit gains of HK$16,320 from his manipulative trades in the derivative warrants and CBBCs.
Sentencing
On 7 August 2014, the Eastern Magistrates sentenced Wong to 180 hours of community service and fined him HK$16,320. The fine imposed is equivalent to the profit made by Wong from selling the derivative warrants and CBBCs at prices artificially pushed higher by his manipulative orders.
Comment
This case illustrates the gravity of potential sentences for offences of false trading, contrary to Section 295 of the SFO. In addition to calling the individual’s fitness and properness into question, persons who commit these offences could be liable on conviction on indictment to a fine of up to HK$10,000,000 and imprisonment for up to 10 years, or on summary conviction, a fine of HK$1,000,000 and to imprisonment for up to 3 years. Furthermore, once convicted, the individual may be subject to disciplinary actions of the SFC under Section 195 of the SFO, by reason of being convicted of an offence with impugns on the fitness and properness of the licensed person to remain licensed. Readers should therefore be carefully ensure that their actions are not in breach of those provisions.
For details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR97
4. SFC suspends Chan Hung Nin for 15 months for unauthorised trading in client’s account
The SFC suspended Mr. Chan Hung Nin for 15 months from 8 August 2014 until 7 November 2015 for breaching the Code of Conduct.
Background
Chan was licensed under the SFO to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities, and is accredited to Celestial Limited and Celestial Commodities Limited (“Celestial”).
The disciplinary action follows an investigation stemmed from a complaint by the client (“Client”), who alleged, inter alia, that Chan conducted unauthorised trades in his account (“Account”). The Account traded actively in stocks and CBBCs between 2 April 2011 and 21 August 2012 without the Client’s specific authorisation. According to Celestial’s records, the Client never signed a Power of Attorney to authorise Chan or any other third party to operate the Account.
When conducting periodic checks on trades without telephone recordings of order placing and confirmation, Celestial identified six such instances in the Account. On four instances where the Client could be reached, the Client falsely represented to Celestial that he had placed the relevant orders by calling Chan’s mobile phone. The SFC found that Chan had asked the Client to make such false representations to Celestial in order to conceal the fact that he was operating the account on a discretionary basis, and the fact that the Client did so suggests that he had impliedly authorised Chan to conduct the trades in question.
The Sanction
In deciding the sanction, the SFC took into account all the relevant circumstances including:
- Chan’s act of coaching the client to lie is deliberate and dishonest;
- Chan is still licensed and serving clients;
- Chan had more than 20 years of experience in the industry at the time of his misconduct; and
- Chan has an otherwise clean disciplinary record.
Comment
Readers should note that it is the duty of a licensed person to abide by the General Principles of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”). If an individual breaches the requirements on discretionary accounts as set out in Paragraph 7.1 of the Code of Conduct, the SFC could conclude that the individual is not fit and proper to be licensed. Licensed corporations should also be aware that, pursuant to the Code of Conduct, tape records must be kept for a minimum period of at least 6 months.
The SFC’s disciplinary actions against Chan are empowered by Sections 194 to 196 of the SFO, which provides that the license of a regulated person may be suspended if he is found to be guilty of misconduct or is not fit and proper to be or to remain the same type of regulated person. As in the present case, the sanction imposed may be aggravated by the individual’s experience in the industry, since it implies that they should have been aware of the aforementioned requirements.
This may be aggravated by the individual’s experience in the industry, which implies that they should have been aware of the aforementioned requirements, thus attracting harsher sanctions.
For details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR98
5. SFC reprimands and fines Winnie Pang Wai Yan for negligence in handling client’s trade orders
On 14 August 2014, the Securities and Futures Commission (SFC) reported that Ms Winnie Pang Wai Yan had been publicly reprimanded and fined HK$120,000 for negligence in handling a client’s trade orders.
Background
Pang has been registered as a relevant individual with the Hong Kong Monetary Authority and engaged by UBS AG to carry on Type 1 (dealing in securities) regulated activity since 20 February 2006.
Pang was a client advisor assistant at UBS AG at the material time. In December 2009, a client at UBS AG wanted to sell his shares in a stock to an identified buyer at agreed amounts and prices through manual cross trades. Instead of placing cross trades as initially instructed by the client, Pang coordinated with the buyer to conduct a series of on-exchange matched trades between 3 and 8 December 2009.
Negligence
Under the Securities and Futures Ordinance (“SFO”), market misconduct of false trading in the form of matched orders is strictly prohibited.
The SFC found that, in handling the client’s orders, Pang did not exercise due care, skill and diligence in the best interests of the client by failure to make enquiries in relation to the relevant transactions to ascertain the client’s intention, report the matter to the Compliance Department of UBS AG, and refrain from acting on the client’s instructions before she was satisfied that the orders and their execution did not affect the best interests of the integrity of the market. Pang thus was in breach of General Principle 2 of the Code of Conduct.
The SFC considers that Pang’s failures called into question her fitness and properness as a registered person. In particular, the SFC took into account Pang’s financial situation, that Pang did not make any personal benefit out of the transactions in question, that there is insufficient evidence to prove to the requisite standard that the matched trades were carried out with manipulative intent, that the matched trades had minimal impact on the nominal price of the stock, that Pang co-operated with the SFC in resolving the disciplinary action and that Pang has an otherwise clean disciplinary record with the SFC.
Comment
Readers should take note that pursuant to section 274(5)(b) and section 295(5)(b) of the SFO, a person may have committed the offence of false trading or be regarded as having engaged in the market misconduct of false trading if a person offers to sell securities at a price that is substantially the same as the price at which he has made or proposes to make, or he knows an associate of his has made or proposes to make, an offer to buy substantially the same number of securities, unless the transaction in question is an off-market transaction. This type of trading is commonly known as matched orders.
For details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR101
6. SFC commences Market Misconduct Tribunal proceedings against former CEO of Water Oasis Group Limited for alleged insider dealing
On 14 August 2014, the Securities and Futures Commission (SFC) reported that proceedings had been commenced in the Market Misconduct Tribunal (MW) against Ms Salina Yu Lai Si, the former Chief Executive Officer of Water Oasis Group Limited (Water Oasis), for alleged insider dealing in Water Oasis shares.
Background
Water Oasis was listed on the Stock Exchange of Hong Kong Limited in March 2002, which principally distributes skincare products in Hong Kong, Macau, Taiwan, Singapore and the Mainland and operates beauty salons, spas and medical beauty centres in Hong Kong and the Mainland. At the material time, Ms Yu was the Chief Executive Officer, a substantial shareholder and an executive director of Water Oasis. Ms Yu resigned as Water Oasis’ Chief Executive Officer and executive director on 6 July 2012.
SFC’s allegation
The SFC alleges that on 20 January 2012 at around 10 am, H2O Plus LLC (H2o) informed Ms Yu that it would terminate Water Oasis’ exclusive distributorship in H2O’s products in the Mainland and Taiwan with immediate effect and shortly after being notified by H2O, Ms Yu proceeded to sell all her Water Oasis shares in one of her securities trading accounts on the same day prior to an announcement by Water Oasis, and avoided a loss of around of around HK$281,346. Subsequently on 20 January 2012 at 10:13 pm, Water Oasis issued an announcement about the termination of the exclusive distribution rights in H2O products.
The SFC also alleges that both the news about the termination of the exclusive distribution rights and the significance of the contribution of H2O’s operations in the Mainland and Taiwan to the net profit of Water Oasis were not publicly known and were material to Water Oasis’s share price. This allegation is backed up by the fact that on 26 January 2012, the first trading day after Water Oasis made the announcement on 20 January 2012, its share price dropped by 14.08% to close at HK$1.22 and on the same day, the Hang Send Index rose 329 points or 1.64% to the level of 20,439.
Comment
Readers, especially for those that are privy to secret price-sensitive information, are reminded that information of this sort must be handled with utmost care. Acquisition of or disposal of relevant securities immediately after obtaining such information should be avoided. In case of doubt, readers should readily seek professional advice on regulatory and legal compliance.
For details, please refer to the SFC articles:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR100
7. SFC reprimands and fines Hung Lai Ping for manager and supervisory failures
The Securities and Futures Commission (SFC) has issued a reprimand to Ms Hung Lai Ping, a former responsible officer of Delta Asia Securities Limited (Delta Asia), and fined her HK$150,000 for managerial and supervisory failures.
Background
Delta Asia is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities), Type 3 (leveraged foreign exchange trading) and Type 4 (advising on securities) regulated activities. Hung is licensed under the SFO to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities. During the period from April 2007 to June 2012, Hung was accredited to Delta Asia and approved to act as its responsible officer.
Findings of the SFC
The SFC found that during the period from January 2010 to February 2013, Delta Asia used shares belonging to clients and held in segregated client accounts at the Central Clearing and Settlement System (CCASS) to settle transactions for its other clients who did not have sufficient shares in their accounts to discharge their respective settlement obligations on the settlement date. This was done without the consent or authorisation of the clients whose shares were used for settlement in contravention of the Securities and Futures (Client Securities) Rules on 36 occasions during the period. Sections 6 and 10 of the Securities and Futures (Client Securities) Rules respectively specifies the circumstances in which intermediaries may withdraw or otherwise deal with client securities received or held on behalf of clients and requires intermediaries to take reasonable steps to ensure that client securities are not deposited, transferred, etc, except in the manner specified in the rules.
In addition the SFC found that on two occasions during the period, Delta Asia had transferred shares belonging to clients and held in the CCASS segregated client accounts to its CCASS clearing account, with a view to settling the transactions for Delta Asia’s other clients who did not have sufficient shares in their accounts to discharge their respective settlement obligations on the settlement date. However, the transferred shares were eventually not sent to the Hong Kong Securities Clearing Company Limited for settlement purpose as a result of the netting of Delta Asia’s positions in the same security on the same day. This occurred without the consent or authorization of the clients whose shares were transferred and were in breach of the Securities and Futures (Client Securities) Rules notwithstanding that the transferred shares were eventually not used for settlement purpose.
The SFC also found that Delta Asia failed to implement proper controls to safeguard client securities and to supervise the staff of Delta Asia in discharging its settlement function, thus allowing the unauthorized transfers of client securities from Delta Asia’s CCASS segregated client accounts to its CCASS clearing account to have gone unchecked for more than three years.
Ms Hung’s negligence
The SFC is of the view that Delta Asia’s settlement malpractice and failures were attributable to negligence on the part of Hung.
Hung was responsible for overseeing the compliance function and all front and back office operations of Delta Asia, including its settlement functions. In her capacity as a responsible officer and a member of senior management, Hung bore primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by Delta Asia, for properly managing the risks associated with the business of Delta Asia, and for supervising diligently persons employed or appointed by Delta Asia to conduct business on its behalf.
Hung has failed to fulfil such responsibility and her failure has manifested itself in the failures that Delta Asia, under her management, has displayed. As a result, the SFC held that Hung had breached General Principles 2, 9 and paragraphs 4.2 and 14.1 of the Code of Conduct. In deciding the sanctions, the SFC took into account that Hung has accepted the SFC’s findings.
Comment
The SFC stresses once again that safe custody of client assets is a fundamental obligation of licensed corporations. Any transgression of this obligation, even if the relevant clients are made whole again, cannot be tolerated.
The SFC has also taken disciplinary action against Delta Asia as a result of the same investigation. This illustrates that the relevant institution alongside the responsible officers/individuals will be penalised for the failure to put sufficient internal control in place. To preserve the public image of the institution, readers should be noted that it is not sufficient that institutions solely rely on the ethics of employees, and a system of internal control is of equal importance. If necessary, professional advice on compliance issues should be sought without delay.
For details, please refer to the SFC articles:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR102
8. SFC issues first-quarter report
On 20 August 2014, the SFC published its Quarterly Report summarising key developments from April to June 2014.
Regulatory update
Of particular significance are the Securities and Futures (Amendment) Ordinance 2014, gazetted in April, which established a framework for the regulation of the over-the-counter derivatives market, and a circular issued by the SFC which set out a guidance on robust internal product approval and design processes for investment products. To encourage more meaningful disclosure, the SFC also requested listed companies to provide specific numbers in their profit alerts and warnings wherever possible.
Shanghai-Hong Kong Stock Connect Pilot Scheme
On 10 April 2014, the China Securities Regulatory Commission and the SFC approved the development of a pilot programme (the “Scheme”) for establishing mutual stock market access between Mainland China and Hong Kong. When launched, the Scheme will operate between the Shanghai Stock Exchange (“SSE”), China Securities Depository and Clearing Corporation Limited (“ChinaClear”), Hong Kong Securities Clearing Company Limited (“HKSCC”).
Enforcement
In the first quarter, the SFC successfully prosecuted 10 individuals or corporations for market misconduct and disciplined 17 licensees, with fines totalling over HK$39 million.
The SFC also reprimanded ICBC International Capital Limited (ICBCI) and fined them a total of HK$25 million regarding their role in an initial public offering. ICBCI failed, inter alia, to conduct customer due diligence and perform ongoing scrutiny of accounts of certain placees referred by Powerlong (Placees) to ensure that the transactions being conducted were consistent with its knowledge of the Placees, taking into account their source of funds, and turned a blind eye to the lack of independence of Placees for the subscription of Powerlong’s shares allotted through its listing on the Stock Exchange of Hong Kong Limited.
The SFC also obtained a judgment which ordered Ernst & Young Hong Kong to produce to the SFC specified accounting record relating to its work as the reporting accountant and auditor for Standard Water Limited.
For further details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR103
For full report please see: http://www.sfc.hk/web/files/ER/Reports/QR/201404-06/Eng/00_Eng%20Full.pdf
9. SFC issues supplemental consultation conclusions on regulation of IPO sponsors
On 22 August 2014, the Securities and Futures Commission (SFC) released supplemental consultation conclusions on prospectus liability, reaffirming that IPO sponsors are subject to existing statutory civil and criminal liability for defective prospectuses.
Initial consultation conclusions
On 9 May 2012, the SFC issued a Consultation Paper on the Regulation of Sponsors, which contained a number of proposals designed to enhance Hong Kong’s sponsor regulatory regime and consolidate all key sponsor obligations in the Code of Conduct for Persons Licensed by or Registered with the SFC (“Code of Conduct”). The Paper invited comments on two broad areas: (i) the regulatory regime for sponsors conduct; and (ii) legislative amendments to clarify sponsors’ civil and criminal liability under existing legislation concerning misstatements in prospectuses. The consultation period ended on 31 July 2012 and 71 responses were received. The SFC released Consultation Conclusions on the Regulation of IPO Sponsors on 12 December 2012. The Conclusions were made in response to concerns expressed in the Consultation Paper that standards of sponsor work have fallen short of expectations. For that reason, the SFC consulted the market on proposals aimed at improving market confidence and the overall quality of sponsor work.
In relation to prospectus liability of sponsors, the SFC concluded in its initial consultation that although there was a strong argument that sponsors were already covered by the relevant legislation, given the lack of relevant case law and varying views expressed by sponsors and others, it may be helpful to specify sponsors in the Companies (Winding Up and Miscellaneous Provisions) Ordinance) (“CWUMPO”) as a category of persons who authorise the issue of prospectuses. Amending Sections 40 and 342F of CWUMPO would make it explicitly clear to all market participants that sponsors are potentially liable under the Ordinance.
However, it remained unclear whether or not such an amendment was necessary, since sponsors were already persons who authorise the issue of a prospectus within the meaning of the CWUMPO (Sections 40(1)(d), 40A(1) and 342F(1)), and are therefore potentially liable.
Supplemental consultation conclusions
Since the release of the Consultation Conclusions, the SFC has engaged with industry participants and other interested parties in further consultations on the proposed legislative amendments. The supplemental consultation conclusions sets out the SFC’s position on the need for further legislative amendments following these consultations and further analysis.
In this subsequent conclusion, the SFC reaffirmed its view that its original position in the Consultation Paper, namely that sponsors are already covered under the existing law, is correct. Thus, sponsors are among those persons who have potential statutory criminal and civil liability under the CWUMPO for untrue statements (including material omissions) in a prospectus. As such, the proposed legislative amendments in the initial consultation conclusions and Consultation Paper will not be pursued as they serve no purpose.
For further details please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR104
For full report please see:
10. Roger Tsui Chi Fung banned for providing false information to SFC
The SFC has banned Mr. Roger Tsui Chi Fung, a former licensed representative, from re-entering the industry for nine months from 15 August 2014 to 14 May 2015.
Background
Tsui was licensed under the Securities and Futures Ordinance (“SFO”) to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts), Type 6 (advising on corporate finance), Type 7 (providing automated trading services) and Type 9 (asset management) regulated activities and was accredited to various licensed corporations between 2000 and 2011. He is currently not accredited to any licensed corporation.
Providing false or misleading information
On 15 Jan 2014, the Eastern Magistrates’ Court convicted Tsui after he pleaded guilty to two counts of providing false or misleading information to the SFC in his capacity as a SFC license holder. He was fined HK$8,000 and ordered to pay the SFC’s investigation costs.
The court heard that, on or around 29 January and 24 August 2009 respectively, Tsui had on each of the dates submitted to the SFC an annual licensing return. In each return, Tsui declared that during the relevant reporting periods, there was no change in the information about him that had been provided to the SFC, including information about his disciplinary record.
The declarations in the two annual returns were false or misleading as the SFC’s investigation revealed that the Financial Industry Regulatory Authority of the United States (“FINRA”) had disciplined Tsui and the sanction imposed on Tsui during the reporting periods was covered by both annual returns.
The sanction
As mentioned above, Sections 194 to 196 empower the SFC to suspend the license of a regulated person if he is found to be guilty of misconduct or not fit and proper to remain the same type of regulated person. The SFC has found that by providing false information regarding his disciplinary record, Tsui is not fit and proper to remain licensed. As such, he has been banned from re-entering the industry for nine months.
Comment
Under Section 384 of the SFO, it is a criminal offence to provide to a specified recipient (including the SFC) any information which is false or misleading in a material particular. This includes but is not limited to information regarding a licensee’s disciplinary record, and the annual return that the licensee is required to submit under Section 138(4) of the SFO. It is therefore important for licensed individuals to ensure that they provide accurate information to the SFC at all times, and failure to do so could result in the suspension or revocation of an SFC license.
For further details please see: http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=14PR106
The article is for general information purpose only and is not intended to constitute legal or other professional advice.
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