SFC suspends China Tonghai Securities rep for unauthorized trades
Hong Kong’s securities regulator has banned a former licensed representative of China Tonghai Securities Limited from re-entering the industry for 18 months after he was convicted of conducting unauthorized trades from clients’ accounts.
The SFC’s investigation found that on several occasions between June 2019 and March 2020, Poon Choi Yung had placed 1,002 trades involving six clients’ accounts without obtaining the proper authorization.
Furthermore, the account manager did not report the unauthorised transactions to his company and failed to keep a proper record of the clients’ instructions, which were sent to him.
Tonghai’s records showed that these clients had never signed discretionary authority to authorize Poon to operate the accounts. And when the company’s compliance department asked him to establish three clients’ financial situations and investment experience during account opening, the former executive failed to either contact or follow up on the matter with the clients.
Poon acted contrary to the internal policy of his company whilst his conduct also fell short of the standard set out in the Code of Conduct, casting doubt on his fitness to be licensed, the SFC said.
SFC hits Citigroup’s local unit with a hefty fine
The violation occurred while he was a registered representative with SFC under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities and accredited to China Tonghai Securities. Following the regulator’s decision, Poon is no longer licensed by the SFC nor registered with the Hong Kong Monetary Authority.
The watchdog further stated that he did not act in the best interests of his clients when he conducted the unauthorised trades in their accounts without permission, breaching the General Principal 2 and paragraph 7.1 of the Code of Conduct.
Hong Kong’s watchdog had recently fined Citigroup’s local unit $45 million for serious lapses and deficiencies in its cash equities business from 2008 to 2018. The review looked into interactions with clients on transactions where Citi acted in a principal capacity, rather than just broking a transaction between different parties.
Further, the watchdog has launched disciplinary proceedings against some former senior managers at the bank, but it didn’t reveal their identity nor how many people were involved.
Since 2014, the local unit of Citigroup, the third-largest US bank by assets, had failed to identify and rectify the failures in its internal controls until the misconduct was discovered during an SFC on-site inspection in late 2018.
In that year, Citigroup’s Hong Kong trading desk fired eight traders and suspended three others after an internal investigation found that they had misled clients. The firing come in the wake of several investigations by the SFC, which found that Citi traders had taken the other side of client trades using the bank’s own balance sheet. The practice had effectively made Citigroup’s facilitation desk a principal in the trades, when the clients were told their trades would be executed on an agency basis, matching orders with those of other clients.