SFC sanctions China Rise Securities Asset Management
The Securities and Futures Commission (SFC) has banned Sammy Shiu Kin Keung, former CEO and responsible officer (RO) of China Rise Securities Asset Management Company, and suspended Wat Hin Pong, a former RO and ex-Head of dealing of China Rise, for 28 months and 7 months respectively.
Shiu’s ban has been imposed due to his criminal conviction in 2017 for illegal short selling, according to an SFC press release. The SFC had also imposed a sanction against China Rise over its internal control failures and regulatory breaches related to short selling and cross trades between January and May 2014.
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, according to the SFC release.
The SFC further found that Shiu had failed to obtain proper approval for his personal dealings, short sales and cross trades as required by China Rise’s internal policies; avoid conflict of interest and take steps to ensure fair treatment of the client in operating the client’s discretionary account; and report cross trades to The Stock Exchange of Hong Kong on four occasions as required by the Rules of the Exchange.
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 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 detect and prevent illegal short selling in relation to Shiu by approving his orders without realising they were uncovered; take any steps to ascertain whether Shiu had disclosed his interest to and obtained consent from the client as required by China Rise’s internal policy before approving Shiu’s cross trades; and review the trading activities in Shiu’s account and the client’s account properly.
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.
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