Broker held amid claims of HK$20m funds theft
Police have arrested a broker and the firm he worked for has been stopped from trading amid allegations about HK$20 million that has been stolen from 28 clients.
The 61-year-old man, identified only as Yip, was detained yesterday after trading irregularities were noticed in the surging stock market, a source close to the investigation said.
A police spokeswoman said he was still being detained last night and no charges had been laid.
The arrest came after two clients of Man Lung Hong Securities complained they had suffered a combined loss of HK$2 million.
The Securities and Futures Commission said later that 28 clients were involved and the loss was about HK$20 million.
The source said Mr Yip, who had worked for the brokerage for 17 years, had a good relationship with his clients and many gave him money to invest rather than send a cheque to the firm.
He is alleged to have sought to profit from selling stocks without the owners' consent when prices were high and bought them back when prices fell. But the rising market this week had made it impossible to buy the stocks back at a lower price.
The SFC issued a restriction notice yesterday morning on Man Lung Hong Securities, banning it from removing clients' deposits or conducting trades.
The commission said the company was a small local brokerage with 750 active cash clients who trade the stocks through the firm without borrowing from it.
The SFC said its initial investigation indicated the brokerage's management might have known about Mr Yip's misappropriation of its clients' assets for some time but had concealed the knowledge from both its clients and the SFC.
'Based on our initial inquiries we do not have confidence in the firm's internal controls and believe that clients' assets are at risk,' the SFC said.
'The above calls into serious doubt the integrity of the firm and its fitness and properness to remain licensed. The SFC therefore considers that the issue of a restriction notice is desirable in the interest of the investing public.'
Clients of Man Lung Hong can contact the securities watchdog via its hotline 28409333.
Under the investor compensation scheme, clients should be able to get compensation of up to HK$150,000 each from the fund, which pays out in the case of a broker's collapse or theft of clients' money by staff.
Following the SFC action, Hong Kong Exchanges and Clearing also banned Man Lung Hong from trading in the stock market and declared it a defaulter.
Secretary for Financial Services and the Treasury Chan Ka-keung said it was a one-off incident.
'It appears to be related to malpractices of an individual trader and does not represent problems across the whole industry,' he said.
Tony Espina, chairman of the Hong Kong Stockbrokers Association, said the case differed from that of the collapse of three brokerages last year. 'Last year's cases were related to the brokerage firms' owners having financial problems, but Man Lung Hong's case seems to be a problem of the staff.'
He said the brokerage professional indemnity insurance covered up to HK$15 million in compensation for an individual case, but he was not sure if the insurer would agree to pay in this case.