Hong Kong SFC Fines Taiping Securities $166,000 for Internal Control Failure over Employees Day-Trading & Speculative Trading Prohibitions, 7 Employees Conducted Day-Trading with 4 Employees Claiming Personal Dealing Policy Not Circulated to Them & 1 Employee with 293 Trades Above Limit
20th June 2023 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has fined Taiping Securities (TSCL) $166,000 (HKD 1.3 million) for internal control failure over employees day-trading & speculative trading prohibitions, with 7 employees conducting day-trading, 4 employees claiming personal dealing policy not circulated to them, and 1 employee with 293 trades above limit. Hong Kong SFC: “ The SFC’s investigation found that TSCL failed to put in place adequate and effective internal controls over monitoring of employee dealings. In this connection, the senior management, the compliance department and the responsible officer (RO) responsible for monitoring employee dealings did not have a clear and consistent understanding of their roles and duties, nor did TSCL maintain any record of their reviews on employees’ transactions. There was no independent review and approval of the personal transactions of the RO, including 293 transactions that exceeded the trading limit prescribed for his personal account … … The SFC also found that TSCL failed to communicate its personal dealing policy applicable during the relevant period to all employees and ensure that they understood and followed its policy.” See full SFC statement below.
“ Hong Kong SFC Fines Taiping Securities $166,000 for Internal Control Failure over Employees Day-Trading & Speculative Trading Prohibitions, 7 Employees Conducted Day-Trading with 4 Employees Claiming Personal Dealing Policy Not Circulated to Them & 1 Employee with 293 Trades Above Limit “
TSCL is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) regulated activity. A copy of the Statement of Disciplinary Action is available on the SFC website
Extracts: TSCL did not maintain any record to demonstrate that it had distributed the Personal Dealing Policy to all employees and clearly informed them that the policy was finalised and implemented during the Relevant Period. Nor did TSCL require its employees to sign any acknowledgement of receipt or understanding of the Personal Dealing Policy. The Personal Dealing Policy provided that employees should not engage in speculative trading activities and day-trading is prohibited in principle. TSCL’s definition of “day-trading” includes any one trade involving the buying and selling of the same stock within the same day (regardless of the amount and quantity involved), and the term “prohibited in principle” in the context of day-trading means that the activity was strictly prohibited save for extreme situations such as there being a “flash crash” in stock prices. TSCL claimed that it had communicated the definition of this requirement to its employees orally during daily communications and meetings.
Contrary to the above requirement, seven employees of TSCL had conducted day-trading (in accordance with TSCL’s definition) during the Relevant Period. Four out of the seven employees claimed that the Personal Dealing Policy was not circulated to them or officially implemented during the Relevant Period, and most of them considered that TSCL did not prohibit day-trading generally but only those that were speculative in nature and where the employees did not have sufficient money in the account for trade settlement. Their views were reinforced by TSCL’s lack of action against their trades over the years.
Hong Kong SFC Fines Taiping Securities $166,000 for Internal Control Failure over Employees Day-Trading & Speculative Trading Prohibitions
- SFC reprimands and fines Taiping Securities (HK) Co Limited $1.3 million for internal control failures over employee dealings
19th June 2023 – The Securities and Futures Commission (SFC) has reprimanded and fined Taiping Securities (HK) Co Limited (TSCL) $1.3 million for internal control failings in relation to employee dealings between 1 January 2016 and 30 November 2018.
The SFC’s investigation found that TSCL failed to put in place adequate and effective internal controls over monitoring of employee dealings. In this connection, the senior management, the compliance department and the responsible officer (RO) responsible for monitoring employee dealings did not have a clear and consistent understanding of their roles and duties, nor did TSCL maintain any record of their reviews on employees’ transactions. There was no independent review and approval of the personal transactions of the RO, including 293 transactions that exceeded the trading limit prescribed for his personal account.
The SFC also found that TSCL failed to communicate its personal dealing policy applicable during the relevant period to all employees and ensure that they understood and followed its policy.
In deciding the disciplinary sanctions against TSCL, the SFC took into account all relevant circumstances, including TSCL’s remedial measures to enhance its internal systems and controls on employee dealings and its otherwise clean disciplinary record.
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