SFC sanctions China Rise Securities Asset Management Company Limited’s former responsible officers

31 Mar 2020



The Securities and Futures Commission (SFC) has banned Mr Sammy Shiu Kin Keung, former chief executive officer and responsible officer (RO) of China Rise Securities Asset Management Company Limited (China Rise), from re-entering the industry for 28 months from 30 March 2020 to 29 July 2022 (Note 1).

Mr Wat Hin Pong, a former RO and ex-head of dealing of China Rise, has also been suspended for seven months from 30 March 2020 to 29 October 2020 (Note 2).

The SFC’s disciplinary action against Shiu follows his criminal conviction in 2017 for illegal short selling and the SFC’s sanction against China Rise over its internal control failures and regulatory breaches related to short selling and cross trades between January and May 2014 (Note 3).

The SFC’s investigation revealed that Shiu placed 199 illegal short selling orders involving 21 listed securities through his personal account and the discretionary account of a client during the material time but concealed them from China Rise and the client.

Shiu also took advantage of the discretionary power granted to him by the client and conducted nine pairs of cross trades in eight listed securities between his personal account and the client’s account without the client’s knowledge.  Eight out of the nine pairs of cross trades were executed at a price to Shiu’s advantage but to the client’s detriment when compared with the nominal price of the relevant shares (Note 4).

The SFC further found that Shiu had failed to:

Wat, responsible for monitoring employee dealings and supervising the operation of discretionary accounts at the material time, routinely approved Shiu’s transactions without making any inquiries nor checking whether there were any irregularities.

Although Wat issued a warning letter to Shiu on behalf of China Rise in early April 2014 following enquiries by the Hong Kong Exchanges and Clearing Limited on some of Shiu’s short sales, he continued to rubber-stamp Shiu’s personal dealings.  As a result, Shiu was able to continue to conduct illegal short selling in April and May 2014.

The SFC found that Wat was derelict in his duties.  Specifically, he had failed to:

The SFC considers that Shiu and Wat had failed to discharge their duties as members of China Rise’s senior management, and their failures contributed to the breakdown in China Rise’s internal controls in relation to the monitoring of employee dealings, supervision of discretionary accounts, and avoidance of conflicts of interest, jeopardising China Rise’s ability to act in the best interest of its clients and market integrity (Note 5).

In deciding the sanction, the SFC took into account all relevant circumstances of the case, including:

End

Notes:

  1. Shiu was licensed under the Securities and Futures Ordinance (SFO) and was accredited to China Rise as an RO in respect of its Type 1 (dealing in securities) regulated activity from 28 August 2009 to 27 April 2015, Type 4 (advising on securities) regulated activity from 14 February 2014 to 27 April 2015, and Type 9 (asset management) regulated activity from 14 February to 14 October 2014.  Shiu is currently not licensed by the SFC.
  2. Wat was licensed under the SFO and was accredited to China Rise as an RO in respect of its Type 1 (dealing in securities) regulated activity from 28 August 2009 to 3 February 2017.  Wat is currently accredited to Canfield Securities Company Limited as an RO in respect of its Type 1 (dealing in securities) regulated activity.
  3. Shiu was convicted on 8 June 2017 for breach of section 170 of the SFO on 14 occasions.  Please refer to the SFC’s press release dated 9 June 2017.  China Rise was reprimanded and fined $6.3 million by the SFC.  Please refer to the SFC’s press release dated 31 October 2019.
  4. General Principle 6 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that a licensed person should try to avoid conflicts of interest and ensure that clients are fairly treated.  Paragraph 10.1 of the Code of Conduct further provides that where a licensed person has a material interest in a transaction with or for a client, the licensed person should not deal in relation to the transaction unless he or she has disclosed that material interest to the client.
  5. General Principle 9 of the Code of Conduct requires the senior management of a licensed corporation to bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the firm.  Paragraph 14.1 of the Code of Conduct further provides that the senior management of a licensed corporation should properly manage the risks associated with the firm’s business.

 


A copy of the Statement of Disciplinary Action is available on the SFC website



Page last updated : 31 Mar 2020