SFC slaps $6.3 million fine on China Rise for illegal short selling
04 November 2019 Hong Kong
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Hong Kong’s Securities and Futures Commission (SFC) has fined China Rise Securities Asset Management Company $6.3 million for failing to prevent its traders engaging in illegal short selling.
SFC found that China Rise guilty of internal control failures and regulatory breaches related to short selling orders, cross trades and keeping of records from January to May 2014 and from January 2015 to August 2016 .
China Rise was also noted to have failed to implement effective internal controls to monitor cross trades between its senior staff members and clients that gave rise to conflicts of interest, and ensure fair treatment of clients.
Moreover, SFC said China Rise failed to report cross trades to the Stock Exchange of Hong Kong or maintain proper records of order placing instructions and its compliance checks.
During the first period noted by SFC that China Rise’s then CEO and responsible officer, Sammy Shiu Kin Keung, placed 199 illegal short selling orders on listed securities for his personal account and a client’s discretionary account from January to May 2014, unbeknown to China Rise.
Of this, the SFC cited: “China Rise was not aware of the short selling orders placed by Shiu until the Hong Kong Exchange made enquiries about some of the transactions. Nevertheless, even after receiving the enquiries, China Rise still failed to detect and prevent further short selling activities in Shiu’s account.”
In deciding the sanction, the SFC took into account that China Rise had taken steps to remediate some of the above internal control deficiencies, and cooperated with the SFC in accepting the SFC’s findings and resolving the disciplinary proceedings.
China Rise was also noted to otherwise have a clean disciplinary record.
SFC found that China Rise guilty of internal control failures and regulatory breaches related to short selling orders, cross trades and keeping of records from January to May 2014 and from January 2015 to August 2016 .
China Rise was also noted to have failed to implement effective internal controls to monitor cross trades between its senior staff members and clients that gave rise to conflicts of interest, and ensure fair treatment of clients.
Moreover, SFC said China Rise failed to report cross trades to the Stock Exchange of Hong Kong or maintain proper records of order placing instructions and its compliance checks.
During the first period noted by SFC that China Rise’s then CEO and responsible officer, Sammy Shiu Kin Keung, placed 199 illegal short selling orders on listed securities for his personal account and a client’s discretionary account from January to May 2014, unbeknown to China Rise.
Of this, the SFC cited: “China Rise was not aware of the short selling orders placed by Shiu until the Hong Kong Exchange made enquiries about some of the transactions. Nevertheless, even after receiving the enquiries, China Rise still failed to detect and prevent further short selling activities in Shiu’s account.”
In deciding the sanction, the SFC took into account that China Rise had taken steps to remediate some of the above internal control deficiencies, and cooperated with the SFC in accepting the SFC’s findings and resolving the disciplinary proceedings.
China Rise was also noted to otherwise have a clean disciplinary record.
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