Hong Kong’s securities regulator fines Standard Chartered Securities US$330,000 for internal control failures
The SFC has found the firm’s failure to put enough controls in place leading to at least 61 instances of regulatory breaches involving short sales
The Securities and Futures Commission has fined Standard Chartered Securities (Hong Kong) HK$2.6 million (US$330,000) for internal control failures relating to short selling orders and breach of the securities and futures (financial resources) rules.
The SFC said on Monday that the firm’s failure to have sufficient controls in place led to at least 61 instances of regulatory breaches involving short sales executed by 11 traders from different trading desks between January 2014 and August 2015.
The firm was also found to have misinterpreted and breached the securities and futures (financial resources) rules by incorrectly including the amounts receivable from its clearing agent. Under the rules, the amounts receivable from Standard Chartered Bank Hong Kong – as a general clearing agent – could not be admitted as liquid assets.
As of 31 August 2015, Standard Chartered Securities (Hong Kong) had a required liquid capital deficit of HK$2 billion, when the receivables from its clearing agent were excluded from its liquid assets.
The SFC maintained that the firm was in breach of the code of conduct and the management, supervision and internal controls guidelines.
It took into account of the duration of the failures and the firm’s cooperation when deciding on the sanction. The firm has already taken steps to rectify the financial resources rules breach and has improved its short selling internal control systems.
The SFC last month fined HSBC Private Bank (Suisse) for a record HK$400 million after the bank lost its appeal against a 2015 ruling for misconduct relating to the sale of structured products linked to Lehman Brothers. The fine was the largest-ever imposed by the SFC.
In October, SFC executive director of enforcement, Tom Atkinson, said in a public forum that the regulator was investigating 15 financial firms for failing in their duties as listing sponsors.