Hong Kong SFC Fines Profitech Securities $513,000 for Failure to Maintain Required Liquid Capital of HKD 3 Million ($386,000), Improperly Re-pledged Client Securities Collateral Without Client Approval to Execution Broker for 17 Months, Provided Financial Accommodation of $2 Million Borrowed Funds to 2 New Clients, and Failure to Notify SFC of Change in Company Shareholding Structure Within 7 Business Days in 2021 April
30th September 2024 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has fined Profitech Securities $513,000 for failure to maintain required liquid capital of HKD 3 million ($386,000), improperly re-pledging client securities collateral without client approval to execution broker for 17 months, provided financial accommodation of $2 million (HKD 15.6 million) borrowed funds to 2 new clients, and failure to notify SFC of change in company shareholding structure within 7 business days in 2021 April. Hong Kong SFC (30/9/24): “The Securities and Futures Commission (SFC) has reprimanded and fined Profitech Securities Limited (Profitech) $3.99 million for failures to comply with the Securities and Futures (Financial Resources) Rules (FRR) and other regulatory requirements (Note 1). The SFC’s investigation found that Profitech failed to maintain its required liquid capital of $3 million in compliance with the FRR between February and June 2021 and since July 2022. The SFC also found that Profitech had improperly repledged client securities collateral to its execution broker for 17 months for financial accommodation without a valid client standing authority and had failed to ensure that the aggregate market value of its repledged securities collateral did not exceed the repledging limit. The SFC further found that Profitech had recklessly provided financial accommodation to two new clients for $15.6 million with borrowed funds without implementing reasonable credit controls and risk management measures. The firm also failed to notify the SFC a change in its holding company’s shareholding structure within seven business days in April 2021. The above-mentioned failures of Profitech constituted breaches of the SFO, the Securities and Futures (Licensing and Registration) (Information) Rules, the Securities and Futures (Client Securities) Rules and the Code of Conduct (Notes 2 and 3).” More info below:
“ Hong Kong SFC Fines Profitech Securities $513,000 for Failure to Maintain Required Liquid Capital of HKD 3 Million ($386,000), Improperly Re-pledged Client Securities Collateral Without Client Approval to Execution Broker for 17 Months, Provided Financial Accommodation of $2 Million Borrowed Funds to 2 New Clients, and Failure to Notify SFC of Change in Company Shareholding Structure Within 7 Business Days in 2021 April “
In deciding the disciplinary sanctions against Profitech, the SFC has taken into account all relevant circumstances, including:
- Profitech’s repeated and prolonged failures to maintain the required liquid capital;
- the gravity of the improper repledge of client securities and Profitech’s failure to rectify the irregularities despite repeated reminders from the SFC and its express undertakings to do so;
- Profitech’s cooperation in resolving the SFC’s concerns, including its agreement to engage an independent reviewer to conduct a review of its relevant internal controls; and
- Profitech’s otherwise clean disciplinary record.
Notes:
- Profitech is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities) regulated activity. Profitech was formerly known as Hang Sing China Securities Limited.
- Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
- Please refer to the Statement of Disciplinary Action for the relevant regulatory requirements.
Hong Kong SFC Fines Profitech Securities $513,000 for Failure to Maintain Required Liquid Capital of HKD 3 Million ($386,000), Improperly Re-pledged Client Securities Collateral Without Client Approval to Execution Broker for 17 Months, Provided Financial Accommodation of $2 Million Borrowed Funds to 2 New Clients, and Failure to Notify SFC of Change in Company Shareholding Structure Within 7 Business Days in 2021 April
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