HSBC Securities reprimanded by HK exchange for BCAN errors

Rick Steves

HSBC Securities engages in Northbound Trading of China Connect Securities. The exchange has advised all participants to review their current set up and adopt appropriate measures to strengthen their controls to ensure compliance with the applicable requirements under Rule 1425A.

The Stock Exchange of Hong Kong Limited, a subsidiary of HKEX, has reprimanded and fined HSBC Securities Brokers (Asia) Limited (HSBC Securities).

The slap on the wrist and penalty follows a disciplinary action taken against the brokerage firm over breaches of various Broker-to-Client Assigned Number (BCAN) requirements.

Issue with Northbound Trading of China Connect Securities

While a registered Exchange Participant and China Connect Exchange Participant (CCEP), HSBC Securities was involved in multiple incidents of BCAN related errors between January 2020 and October 2021. This was brought to the exchange’s attention, whose officials investigated and found a number of failings, including:

ensure accuracy of the Client Identification Data (CID)1 in the submitted BCAN-CID Mapping File;
obtain the Exchange’s written approval for changing or re-using BCANs;
ensure only one BCAN is assigned to one client; and
ensure accuracy of tagging of order to the corresponding BCAN.

BCAN errors amounted to breaches in a number of requirements and affected a total of 92 clients and over 3 million orders.

HSBC Securities self-reported the breaches and provided timely remedial measures, including engaging external consultants to review its internal controls of BCAN related matters to expedite completion of remediation work.

The clients affected by HSBC Securities’ failures had not suffered any financial loss and the broker has an otherwise clean disciplinary record with the exchange.

HSBC Securities engages in Northbound Trading of China Connect Securities. The exchange has advised all participants to review their current set up and adopt appropriate measures to strengthen their controls to ensure compliance with the applicable requirements under Rule 1425A.

The abovementioned rule requires CCEP and Trade Through Exchange Participants to, amongst others, ensure the BCAN-CID Mapping File is accurate and up to date; BCAN assigned to a client should not be changed or re-used unless with the Exchange’s prior written approval; assign one BCAN for one client; and ensure correct tagging of BCAN to each corresponding order on a real-time basis.

 

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