HONG KONG: SFC Reprimands and Fines Standard Chartered Securities (Hong Kong) Limited $2.6 Million

Monday December 18 2017

The Securities and Futures Commission (SFC) has reprimanded and fined Standard Chartered Securities (Hong Kong) Limited (SCSHK) $2.6 million for internal control failures relating to short selling orders and breach of the Securities and Futures (Financial Resources) Rules (FRR).

The Securities and Futures Commission (SFC) has reprimanded and fined Standard Chartered Securities (Hong Kong) Limited (SCSHK) $2.6 million for internal control failures relating to short selling orders and breach of the Securities and Futures (Financial Resources) Rules (FRR) (Note 1).

The SFC found that, from January 2014 to August 2015, SCSHK failed to put in place adequate system and control procedures that resulted in at least 61 instances of regulatory breaches involving short sales executed by 11 traders from different trading desks.

The SFC also found that SCSHK mis-interpreted and breached the FRR by incorrectly including the amounts receivable from its clearing agent, Standard Chartered Bank (Hong Kong) Limited (SCBHK), as liquid assets in its financial returns for January to September 2015. As at 31 August 2015, SCSHK had a required liquid capital deficit of $2 billion when the receivables from SCBHK were excluded from its liquid assets.

The SFC is of the view that SCSHK was in breach of the Code of Conduct and the Management, Supervision and Internal Controls Guidelines. In deciding the sanction, the SFC took into account all relevant circumstances of the case, including:

• the duration and extent of SCSHK’s failures;
• SCSHK’s cooperation with the SFC in resolving the disciplinary proceedings;
• SCSHK has taken immediate steps to rectify the FRR breach and other remedial measures;
• SCSHK has improved its short selling internal control systems; and
• SCSHK’s otherwise clean disciplinary record.

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