The Securities & Futures Commission of Hong Kong (SFC) issues a 6-month ban on a trader for concealing a significant trade execution error and only reporting the incident to management and compliance 4 days later.
The SFC recently imposed a six-month ban on a trader from a leading global investment banking, securities, and asset and wealth management firm. The trader in question placed a client order but wrongly entered 232,000 shares instead of the required 2,232,000, under-executing the client’s order by two million shares.
He was alerted to the trade execution error after market close on the same day but only reported it to his firm’s management and compliance department 4 days later.
The SFC found that the trader in question had acted dishonestly to conceal the execution error. The regulator noted how he attempted to rectify the issue by arranging a facilitation trade to buy the under-executed two million shares to fill the client’s order and had misrepresented to colleagues involved in the execution of the facilitation trade that he had obtained the client’s consent for the action when he had not. Additionally, he booked the lower price for the original trade to the client’s account instead of the higher price for the facilitation trade, making it more difficult for his firm to identify the error.
The SFC says the conduct is a clear breach of the Code of Conduct and concludes that the guilty party is not currently deemed fit and proper to be a licensed person.
See further detail about the case in the SFC’s enforcement press release.
To carry out regulated activities in Hong Kong, the SFC requires licensees to meet fit and proper criteria and competence assessments that include academic and professional qualifications, industry experience and qualifications, and the Hong Kong regulatory framework papers.
The SFC has now published 7 guides to help educate the market about licensing and competency requirements for private equity firms, hedge fund managers, family offices, and overseas and mainland professionals. The regulator notes within these guides that it will grant licences only to persons who meet the fit and proper requirements of their respective roles.
See the SFC’s quick reference guides to licensing requirements.
Every financial firm needs a robust system of confirming all staff are deemed “fit and proper” for the requirements of their roles—particularly at the most senior levels., MCO offers a streamlined Representative Registrations and Licensing (RRL) module to bring transparency and reduce complexity of tracking and assuring fit and proper requirements.
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Learn more about how award-winning regulatory technology can help your firm uphold its regulatory obligations regarding fit and proper requirements—and protect itself from reputational harm.