Securities watchdog bans small brokerage from trading after its boss owns up to stealing clients' shares The Securities and Futures Commission has banned broker Wing Yip from trading after its owner admitted to having stolen clients' shares worth HK$4.3 million. Wing Yip is the third broker in three months to collapse with clients' shares going missing, prompting the regulator and other brokers to urge investors to open accounts that let the stock exchange clearing house hold their shares instead of putting them in their brokers' accounts. The commission yesterday issued a restriction notice on Wing Yip, a small local broker that has operated for more than 20 years, barring the firm from trading or removing any assets. The stock exchange, meanwhile, declared Wing Yip in default and said it would sell the broker's shares held in the exchange clearing system to wind up unsettled positions. Wing Yip, owned by Yip Kwok-kay, had 280 active cash clients and did not conduct securities margin financing, the SFC said. The commission found in a review of Wing Yip's financial returns that the firm did not have enough money to match the liquid capital requirements under the Securities and Futures (Financial Resources) Rules, prompting the watchdog to conduct an unannounced inspection of the firm last Friday. After questioning by the SFC, Mr Yip admitted that he had misappropriated client securities worth HK$4.3 million as of Sunday and confirmed he had provided clients with false statements to cover up the loss, according to the regulator. Mr Yip said he was fully co-operating with the SFC. 'I feel really sorry and shameful for my clients and for the negative impact to the industry,' Mr Yip said. 'I hope my firm is the last broker to have a problem. The brokerage industry is healthy as a whole. What happened to my company was purely my personal problem.' In late May, the SFC found Whole Win Securities had a HK$28 million financial deficit, while last month Tiffit Securities collapsed, leaving about 700 clients facing total losses of up to HK$37.6 million. A group of 55 Tiffit investors plans to take legal action to seek compensation while 20 yesterday met Democratic Alliance for the Betterment and Progress of Hong Kong legislator Choy So-yuk to complain that the SFC was being too slow in distributing shares back to them. The SFC said Tiffit's administrator KPMG was arranging the share distribution. The repeated failures of brokerage firms were a result of government policies, said brokerage industry legislator Chim Pui-chung yesterday. 'The government has allowed some banks to use zero commission or other incentives to compete for securities clients with brokers,' Mr Chim said. 'This created a hard time for many of the 450 small brokers in Hong Kong.' The SFC has referred the case to the police who it is understood have raided the Wing Yip offices in Central. The SFC has urged investors to use the Investor Participant account to have full control of their shares or use the Stock Segregated Account with Statement Service, at the stock exchange clearing system to prevent their shares being easily stolen. Clients of Wing Yip may contact the SFC on its Investor Hotline at 2840 9333.