Hong Kong’s SFC bans securities firm representative for accepting instructions via mobile apps
The SFC found that Wong Ka Hang accepted instructions from a third party to trade in a client’s account without obtaining the client’s written authorization.
Hong Kong’s Securities and Futures Commission (SFC) has prohibited Mr Wong Ka Hang from re-entering the industry for 9 months pursuant to section 194 of the Securities and Futures Ordinance. This marks yet another action by the regulator regarding the use of mobile apps to accept client orders.
The SFC found that Wong accepted instructions from a third party to trade in the account of a client without obtaining the client’s written authorization, and used the client’s password to access the client’s futures account online and conduct trades on his behalf.
Wong was a licensed representative of Haitong International Futures Limited (Haitong) between 26 April 2011 and 26 September 2015. On 9 January 2015, the client opened a futures account at Haitong.
During the period from January 2015 to September 2015, the client and/or the third party gave order instructions to Wong via mobile phone or WeChat messages to trade in the client’s futures account.
Wong accepted the third party’s instructions even though the client had not signed a written authorization authorizing the third party to give instructions in respect of his account, and such authorization had not been approved by Haitong’s authorized person. Wong would also access the client’s futures account online by using his password and conduct trades in his futures account based on the client’s or the third party’s instructions.
The SFC concluded that Wong is not a fit and proper person to be licensed.
In deciding the sanction, the SFC has taken into account a number of factors, including that Wong has disregarded the requirements under the Code of Conduct and failed to comply with Haitong’s procedures for effecting third party authorization, as well as the fact that Wong has an otherwise clean disciplinary record.
The proper handling of order instructions has been in the focus of Hong Kong regulators for a while. In May last year, the SFC posted a circular to intermediaries, providing a guidance on the key controls and procedures which intermediaries are expected to put in place when using instant messaging applications, such as WeChat and WhatsApp, to receive client orders.
The regulator requires that messages relating to client orders (order messages) and the IM accounts and devices for storing and processing them should be properly maintained and centrally managed to reduce the possibility of error and minimize the risk of record tampering. All order messages should be fully recorded and properly maintained for a period of not less than two years.
In order to provide security and reliability, the firms should make sure that the identities of clients who send order messages should be properly authenticated and validated.
