Securities and Futures Commission imposes a whopping HK$497m in fines last year
Although the SFC imposed higher fines it also conducted fewer investigations, focusing instead on big cases involving corporate fraud and misconduct of listing sponsors, according to a study by law firm Freshfields Bruckhaus Deringer
The Securities and Futures Commission imposed a record HK$497 million (US$63.7 million) in fines in 2017 even though it undertook fewer investigations, as the regulator made corporate fraud and misfeasance its top enforcement priority, according to a report by law firm Freshfields Bruckhaus Deringer.
The fines last year increased by 632 per cent compared to 2016, which was mainly because of the record HK$400 million penalty imposed on HSBC Private Bank (Suisse) in November, after the bank lost its appeal against a 2015 ruling for misconduct relating to the sale of structured products linked to Lehman Brothers. This was the largest ever fine imposed on a single case by the SFC since the regulator was set up in 1989.
Excluding the HSBC case, the fines still grew more than 40 per cent compared to 2016, Freshfields’ annual study of the SFC’s enforcement records showed.
The study showed the number of new investigations by the SFC decreased by 20 per cent to 414 cases, down from 515 in 2016, while it completed 591 investigations, up 36 per cent from 436 a year earlier.
The trend of SFC imposing heavier fines is likely to continue in the coming years as it focuses on bigger type of misconducts, Dawson added.
“This is the style of the SFC executive director of enforcement, Tom Atkinson, who is very keen on investigating corporate frauds and failures of listing sponsors.”
Atkinson, who took office in May 2016, has put corporate fraud and sponsor regulation on top of his agenda as he is investigating 15 financial firms who may have failed in their duty when they were acting as sponsors to help companies go public.
He told a regulatory summit in October the SFC was also investigating 136 corporate frauds, 28 of which are classed as very serious.
Atkinson has currently set his sights on Hong Kong’s largest financial advisory firm Convoy Global Holdings and its related companies. The investigation, which was made known to the public in December last year, is Hong Kong’s largest anti-graft and market misconduct case when the SFC joined forces with the Independent Commission Against Corruption to raid the offices of Convoy and its related companies.
This led to the arrest of four people, including Convoy’s former chairman, Quincy Wong Lee-man, and Mark Mak Kwong-yiu, the former chairman of Lerado Financial Group.
The SFC has also been strengthening cross border investigation with the China Securities Regulatory Commission (CSRC) after a Hong Kong court last year ruled that the SFC can assist the CSRC. According to CSRC figures, the two regulators cooperated on over 130 cases in 2017.
“By examining the individual liability of senior managers, and through its ever-stronger relationship with the CSRC, it is aiming to pursue its regulatory strategy with greater efficiency and effectiveness. I believe it will maintain this approach in 2018,” Dawson said.
