Hong Kong's Securities and Futures Commission (SFC) has reprimanded and fined China Industrial Securities International Brokerage Limited (China Industrial) $3.5m for internal control failures relating to monitoring of suspicious trading activities and recording of client order instructions.
In a statement today (22 August), the regulator said the disciplinary action followed an SFC investigation which found that China Industrial had failed to effectively implement its internal policy on post-trade monitoring and ensure all unusual transactions flagged by its post-trade surveillance system (Alerts) were properly examined from 1 August 2017 to 31 July 2019 and from 1 June to 31 October 2020.
China Industrial also failed to ensure the findings and outcomes of its examinations of the Alerts were adequately documented from March 2016 to October 2020 and to have in place effective compliance procedures to ensure the proper implementation of the internal policy on post-trade monitoring and documentation of the Alerts examinations during the relevant periods.
Separately, the SFC found that China Industrial had failed to comply with the regulatory requirements on recording of telephone order instructions by failing to effectively implement its internal policy on recording of telephone orders, and properly record and maintain telephone order instructions from clients in relation to at least 1,034 orders.
In addition, China Industrial failed to diligently supervise its account executives and take adequate and timely follow-up actions against those in breach of the internal policy on recording of telephone orders and report immediately to the SFC after it became aware of its account executives' breaches of the regulatory requirements on recording of telephone order instructions.
In deciding the disciplinary sanction, the SFC has taken into account China Industrial's cooperation in resolving the SFC's concerns and its otherwise clean disciplinary record.
In a separate action, the SFC said on 21 August it had reprimanded and fined Changjiang Corporate Finance (HK) Limited (CJCF) $20m for serious and extensive failures in discharging its duties as the sponsor in six listing applications.
The six listing applications, submitted by CJCF between September 2015 and December 2017, are: Pacific Infinity Resources Holdings Limited (Pacific Infinity); AsiaPac Net Media Holdings Limited (AsiaPac); Perpetual Power Holdings Limited (Perpetual Power); Van Chuam International (Cayman) Limited (Van Chuam); Rising Sun Construction Holdings Limited (Rising Sun); and Byleasing Holdings Limited (Byleasing) (Notes 2 & 3).
The SFC has also partially suspended CJCF's licence to the extent that the firm shall not act as a sponsor for listing applications on the SEHK of any securities, for one year from 18 August 2023 or until the SFC is satisfied that the controls and procedures of CJCF's sponsor-related business are adequate for ensuring compliance with the relevant legal and regulatory requirements, whichever is later.
Further details of the case are here.
