HONG KONG: SFC reprimands and fines two JP Morgan entities HK$5.6 million for disclosure breaches

Tuesday October 25 2016

The Securities and Futures Commission (SFC) has reprimanded J.P. Morgan Securities (Asia Pacific) Limited (JPMSAP) and JPMorgan Chase Bank, National Association (JPMCB), and fined them HK$3 million and HK$2.6 million respectively for regulatory breaches including disclosure failures in research reports and offering offshore listed index options without the required licences.

The SFC’s investigations into the conduct of JPMSAP and JPMCB found the following breaches:

• Disclosure of financial interests and market making activities in research reports;
• Offering of offshore index options without Type 2 and/or Type 5 registration; and
• Delay in reporting breaches to the SFC.

Paragraph 16.5(a) of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that where a firm has any financial interests in relation to an issuer or a new listing applicant the securities in respect of which are reviewed in a research report, and such interests aggregate to an amount equal to or more than 1% of the issuer’s market capitalization (or the new listing applicant’s issued share capital), the firm should disclose that fact in the research report.

Paragraph 16.5(b) of the Code of Conduct requires a firm that makes, or will make, a market in the securities in respect of the issuer or the new listing applicant to disclose that fact in the research report. Paragraph 16.10(a) of the Code of Conduct requires such disclosure to be clear, concise and specific.

Please click the link at the top of the page for the announcement by the SFC.