Hong Kong regulator fines CLSA

  • Mar 14, 2018

CLSA fined and reprimanded for internal control failures related to its securities trading business.

Hong Kong's Securities and Futures Commission (SFC) said on March 13 that it had fined CLSA HKD9 million (USD1.1 million) for internal control failures related to its securities trading business.

According to an SFC statement, in November 2016, the SFC and CLSA jointly engaged an independent reviewer to conduct a review of the latter’s internal controls in the period between 2014 and 2016.  

The review found that CLSA did not put in place, until March 2016, controls to separate its agency execution and client facilitation trading despite having introduced client facilitation services in 1986.

Under SFC’s code of conduct, a licensed company should avoid conflicts of interests by establishing and maintaining adequate “Chinese walls”, such as the separation of dealers handling discretionary orders from those handling proprietary accounts.

The review also found that CLSA did not notify the SFC until February 2015 despite having learnt as early as April 2013 that its licensed representatives were suspected of violating overseas regulatory requirements and were being investigated by a foreign regulator.

“The SFC also took into consideration the undertaking of CLSA’s board of directors that reasonable steps will be implemented within the next 12 months to rectify CLSA’s internal control failures,” the statement said.

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