According to Hong Kong’s Securities and Futures Commission (SFC), FIL Interment Limited is liable for a fine of 3.5 million Hong Kong Dollars (about 450,000 USD) for violating the regulations of the commission. According to SFC, the company had failed to keep to the regulatory stipulations guiding the conduct of securities and futures contracts.
The commission fined FIL Investment (FIMHK) for submitting the wrong information during the application. Other offences pinned to the fine include delay in reporting violations to the commission and carrying out futures contracts that were not licensed.
According to investigations from SFC, the company carried out about 6,738 trades in futures contracts from August 2007 to July 2018. The futures contracts were executed on behalf of its overseas-based affiliates with total transaction agreement of $39.7USD. SFC noted that these transactions were carried out without any approval or license from the regulator.
However, the company carried out a review from May to June 2018, which pointed out the breach. Even after identifying the breach, FIMHK did not report the violation not until it received external legal service. For these reasons, SFC says FIMHK will pay a fine for the multiple offences of violating regulatory conducts and failing to report such violations on time.
Investigation on the case carried out by an independent body
FIMHK conducted reviews on the situation via an independent body. From the investigation conducted, there were certain weaknesses and shortcomings in the company’s internal control systems. From the investigation, the deficiencies revealed that FIMHK failed to implement effective and satisfactory controls to make sure all information submitted to the commission are accurate.
How SFC determined the right disciplinary measures
SFC said it went through rigorous processes to determine the right type of punishment for the violation and misconduct. According to the commission, it looked at a lot of factors, including the having no evidence whether the breach of FIMHK were deliberate or intentional. The commission said it did not get accurate information regarding SFC’s level of awareness on the violation. Also, the SFC does not have any evidence that suggests clients suffered financial loss due to the violations.
Submission of wrong documents also part of the punishment
Apart from violations and delay in submission, the commission is also holding FIMHK liable for submitting incorrect information. According to the commission, in March 2017, FIMHK did not submit the required information when it was applying for a new fund authorisation. SFC said the company knowingly used an outdated template to submit incorrect information for an application. As a result, the wrong information influenced the commission’s decision for approval of the company’s application.
The company had taken necessary corrective measures to strengthen the system. It has also worked with SFC to resolve the concerns of the commission.
SFC in line to protect the market
Hong Kong’s SFC is responsible for keeping the securities and futures industry stable in the country. The regulator has rules guiding the registration and license of securities companies. It allows the market in order for a secure securities market.