The SFC considers Xu Tao breached the Code of Conduct and that this breach has called into question his reliability, reputation, and ability to carry out regulated activities competently.
The use of chat applications in the financial services industry has been subject to bans and heavy regulations in many jurisdictions across the globe. This regulatory approach has been adopted by Hong Kong authorities too. Today, the Hong Kong Securities and Futures Commission (SFC) has once again acted against the illegal use of chat applications.
The SFC announces that it has prohibited Mr Xu Tao, a former investment consultant of China International Capital Corporation Hong Kong Securities Limited (CICC), from re-entering the industry for four months. The ban will last until February 10, 2018.
Xu was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts) and Type 4 (advising on securities) regulated activities and accredited to CICC between September 2008 and October 2015. He is currently not licensed by the SFC.
The penalty is imposed over findings that Xu used his mobile phone and WeChat messaging application to accept order instructions from 13 clients between February and August 2015, in violation of the SFC’s Code of Conduct and the internal policies and procedures of CICC.
Under Hong Kong regulations, where order instructions are received from clients through the telephone, a licensed or registered person should use a telephone recording system to record the instructions and maintain telephone recordings as part of its records for at least six months. Paragraph 3.9 of the Code of Conduct also states that the use of mobile phones for receiving client order instructions is strongly discouraged. However, where orders are accepted by mobile phones, staff members should immediately call back to their licensed or registered person’s telephone recording system and record the time of receipt and the order details.
The action against Xu adds to previous sanctions imposed by the Hong Kong regulator with regard to illegal use of chat applications in the financial services industry. In March this year, for instance, SFC banned Philip Leung Ming Yin, a former account executive of HSBC Broking Securities (Asia) Limited (HSBC Securities), for six months over using his personal phone and WeChat to receive and confirm order instructions. The violations lasted between March and July 2015 without maintaining a proper record of the instructions as required by the SFC’s Code of Conduct.
In a similar action in December 2016, SFC prohibited Mr Poon Kin Lung, a former account executive of Phillip Securities (Hong Kong) Limited (Phillip), from re-entering the industry for two years over breaches of the SFC’s Code of Conduct. The SFC found that Poon had received order instructions from two clients via WhatsApp and mobile phone, but he had failed to keep a proper record of their instructions in accordance with Phillip’s internal policies.