Compliance & Regulation

SFC reprimands and fines China Everbright Securities (HK) Limited HKD2.5 million

The Securities and Futures Commission (SFC) has reported that it has reprimanded China Everbright Securities (HK) Limited (CESHK) and fined it HKD2.5 million for pledging its clients’ securities with banks for financial accommodation without valid authorisation.

The SFC’s investigation found that between 1 April 2018 and 19 August 2018, CESHK relied on expired standing authority given by around 6,841 clients to pledge their securities as collateral in obtaining credit line from three banks in Hong Kong.  The standing authority in question had expired on 31 March 2018.

By pledging clients’ securities without valid authorization from them, CESHK breached the Securities and Futures (Client Securities) Rules (CSR) and the Code of Conduct.

In deciding the sanction, the SFC has said that it has taken into account all relevant circumstances, including:

  • After CESHK discovered its non-compliance with the CSR, it arranged call-backs of all pledged client securities and made a self-report to the SFC;
  • CESHK’s failure to renew the clients’ standing authority was mainly caused by miscommunication between its former and current compliance team members and there is no evidence of systemic failure on the part of CESHK;
  • There is no evidence of client loss as a result of CESHK’s breach; and
  • CESHK co-operated with the SFC in resolving the SFC’s concerns and accepting the SFC’s findings and disciplinary action.