HK broker fined, rep officer banned over deficiencies

Hong Kong’s securities regulator has fined China Securities Holdings HK$1.3 million ($193,435) and banned its responsible officer for two years for what it brands "a number of serious deficiencies".

The Securities and Futures Commission (SFC) issued a reprimand to the firm, citing deficiencies in record keeping, employment of unlicensed staff and lack of supervision of dealing functions. It banned Stephanie Liu Suk Wai for 27 months, from August 15 this year to November 14, 2015.

The SFC found that between 2007 and 2011, China Securities employed staff unlicensed to work as dealers (i.e., to take order instructions from clients and execute the orders on behalf of clients.)

It also found that China Securities allowed the unlicensed dealers to operate its dealing room without a responsible officer to supervise the functions.

In addition, after reviewing the firm’s dealing records from November 2009 to June 2011, it discovered that most of China Securities’ order tickets were not time-stamped. As a result, the incomplete order records failed to enable trade executions to be traced through China Securities’ system to identify which accounts the trades were executed for.

Hong Kong-based China Securities, formerly Vermont Securities Company, ceased business on December 31, 2012, although the SFC notes that the firm would have revoked its licence had it stayed open given the “sustained, serious and deliberate nature of this misconduct”.

According to the SFC, these failures were directly attributed to Liu, one of three responsible officers at the time, who was “seldom at the office and neglected her management responsibility” and “connived the unlicensed activities”.

Liu, who previously held a type 1 (dealing in securities) licence, was not holding the licence at the time of the fine, although the SFC notes that if she did, they would have revoked it.