Hong Kong’s securities regulator has fined Cheong Lee Securities HK$2 million ($257,921) for internal control failures relating to self-matching transactions.
A Securities and Futures Commission investigation into Cheong Lee’s client securities trading activities found that the firm allowed its clients to adopt a master account and sub-accounts structure.
From December 2008 to November 2011, more than 1,500 transactions were traded between the sub-accounts operated by different traders for the same master account. Cheong Lee was found to have failed to put in place effective internal control procedures to detect and prevent self-matching transactions between the sub-accounts that the SFC considers to be not “in the best interest of market integrity”.
In deciding the sanction, the SFC took into account all relevant circumstances of the case, including: adequate and effective internal control systems are fundamental to the fitness and properness of a licensed corporation; Cheong Lee’s failures lasted for more than three years; the firm has a clean disciplinary record; and the firm co-operated in resolving these disciplinary proceedings.
Cheong Lee is approved to deal in securities and futures, and advise on securities and futures (licence types 1, 2, 4 and 5).
Separately, the SFC says listed companies have become more vigilant in identifying and disclosing information in a timely manner, after it had implemented a statutory disclosure regime last January. In 2013, corporate announcements about inside information increased by 52% over 2012. Profit alerts and warnings went up by 16% from the year before.
There was also a 48% increase in announcements, which includes updates on companies’ trading performance, such as monthly sales figures, production volumes and other key performance indicators.
“We commend listed companies’ initiatives to issue regular updates on their trading performance to enhance transparency,” says Ashley Alder, SFC chief executive.