SFC reprimands and fines Nomura International (Hong Kong) Limited HK$4.5 million for regulatory breach

30 Jul 2015



The Securities and Futures Commission (SFC) has reprimanded and fined Nomura International (Hong Kong) Limited (Nomura Hong Kong) HK$4.5 million for failing to report significant misconduct by a former trader in a timely manner (Note 1).

On 11 June 2013, Nomura Hong Kong informed the SFC that Mr X, a trader on secondment from Nomura Securities Co., Ltd in Japan (Nomura Japan), had incurred a US$3.3 million trading loss on 23 May 2013 and that he had been sent back to Japan on 5 June 2013 (11 June Report) (Note 2).

However, the SFC subsequently found out that at the time of the 11 June Report, Nomura Hong Kong already knew Mr X had admitted to making false entries in Nomura Hong Kong’s risk management system to conceal the real risk exposure of his trades and to providing false information to Nomura Hong Kong. Yet, none of these matters were disclosed to the SFC immediately when they should have been under the Code of Conduct (Note 3).

The SFC also found out that by the time Mr X left Hong Kong following the termination of his secondment with Nomura Hong Kong, Nomura Hong Kong had already noticed some apparent discrepancies between his actual trading activities and the information he had provided to management. Mr X was sent back to Nomura Japan before the SFC had been properly alerted and before Nomura Hong Kong had completed its internal investigation into his conduct.

The SFC further found that by 19 June 2013, Nomura Hong Kong had already prepared a draft preliminary report of its investigation on Mr X’s trading activities, but it did not provide the report or its subsequent drafts to the SFC until the SFC made further enquiries.

It was not until 17 July 2013, after the SFC followed up on Nomura Hong Kong’s 11 June Report, that Nomura Hong Kong informed the SFC for the first time that Mr X had engaged in inappropriate conduct. The SFC was eventually provided with the preliminary report two days later.

Mr Mark Steward, the SFC’s Executive Director of Enforcement, said: “Nomura left out highly relevant information from its first report to the SFC and then had to be chased to report properly. There can be no excuses for such delays in reporting matters requiring our immediate attention. Delays, like these, contribute to misconduct and prejudice investigations. Intermediaries must report problems to us immediately - not after internal investigation, not after legal advice has been obtained but straightaway, without leaving out any important information.”

End

Notes:

  1. Nomura Hong Kong is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts) and Type 6 (advising on corporate finance) regulated activities.
  2. Mr X was licensed under the SFO to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities and was accredited with Nomura Hong Kong between 31 December 2012 and 6 June 2013.
  3. Under paragraph 12.5 of the Code of Conduct for Persons Licensed by and Registered with the SFC, a licensed or registered person is required to notify the SFC immediately on the happening of any material breach, infringement, non-compliance with any rules, laws, regulations and codes administered or issued by the SFC, or where it suspects any such breach, infringement or non-compliance by itself or persons it employs or appoints to conduct business with clients.

A copy of the Statement of Disciplinary Action in relation to the matter is available on the SFC website



Page last updated : 30 Jul 2015