SFC fines securities firm account executive over lack of phone records of order instructions
Wu Hon Cheung, former account executive at Sun Hung Kai Investment Services Limited, gets a $50,000 fine for failing to properly record order instructions received from a client through his mobile phone.
Use of mobile phones at the workplace is once again at the heart of a disciplinary action taken the Hong Kong Securities and Futures Commission (SFC). The regulator said today that it had reprimanded Mr Wu Hon Cheung, a former account executive of Sun Hung Kai Investment Services Limited, and fined him $50,000 over his failure to properly record order instructions received from a client through his mobile phone.
Sun Hung Kai’s records show that there were 33 trades in the client’s securities trading account between August 2014 and January 2015. Whereas Wu stated that he received the client’s orders for the Trades by his mobile phone, there were no telephone records in respect of all the trades and there were no entries for 20 of the trades in Wu’s manual trade blotter.
Under Sun Hung Kai’s order recording policies, Wu should not have taken client orders by mobile phone. However, he continued to do so because he did not want to lose the client’s business. He accepted that he did not properly maintain telephone recordings in respect of the orders he received from the client for the trades.
The SFC notes 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 person’s telephone recording system and record the time of receipt and the order details. The use of other formats (e.g. in writing by hand) to record details of clients’ order instructions and time of receipt should only be used if the licensed person’s telephone recording system cannot be accessed. This is reflected in Sun Hung Kai’s operation manual.
The SFC considers that Wu breached paragraph 3.9 of the Code of Conduct and the internal policies of Sun Hung Kai. Also, Wu’s failure to maintain records of the client’s orders has called into question his ability to act with due skill, care and diligence, and in the best interests of his clients. The SFC has concluded that Wu’s fitness and properness to be a licensed person has been called into question.
In reaching its decision, the SFC has taken into account all relevant circumstances, including that Wu has an otherwise clean disciplinary record.
This is not the first time that the Hong Kong securities regulator imposes penalties over improper records. In December last year, the SFC imposed a $2.6 million fine on Standard Chartered Securities (Hong Kong) Limited (SCSHK), the securities brokerage arm of the Standard Chartered Bank Group, over a failure to put in place adequate system and control procedures to ensure compliance with the disclosure requirements in relation to short selling orders under sections 171 and 172 of the SFO (Short Selling Provisions); and a failure to comply with the Securities and Futures (Financial Resources) Rules (FRR). The regulatory investigation has shown that from January 2014 to January 2015 for some of the orders placed with Equity Derivatives & Convertible Bonds trading desks, there were inadequate written records of the stock borrowing arrangements between different trading desks within SCSHK.
Regarding mobile communications and mobile applications, the tough stance of the SFC is widely known. In October 2017, the SFC said it had 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 penalty was 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.
