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SFC reprimands and fines China Industrial Securities International Brokerage Limited $3.5 million for internal control failures

Issue date: 2023-08-22 16:39:04

The Securities and Futures Commission (SFC) has reprimanded and fined China Industrial Securities International Brokerage Limited (China Industrial) $3.5 million for internal control failures relating to monitoring of suspicious trading activities and recording of client order instructions (Note 1).

The disciplinary action followed an SFC investigation which found that China Industrial had failed to effectively implement its internal policy on post-trade monitoring and ensure all unusual transactions flagged by its post-trade surveillance system (Alerts) were properly examined from 1 August 2017 to 31 July 2019 and from 1 June to 31 October 2020 (Relevant Periods).

China Industrial also failed to ensure the findings and outcomes of its examinations of the Alerts were adequately documented from March 2016 to October 2020 and to have in place effective compliance procedures to ensure the proper implementation of the internal policy on post-trade monitoring and documentation of the Alerts examinations during the Relevant Periods (Note 2).

Separately, the SFC found that during the Relevant Periods, China Industrial had failed to comply with the regulatory requirements on recording of telephone order instructions by failing to effectively implement its internal policy on recording of telephone orders, and properly record and maintain telephone order instructions from clients in relation to at least 1,034 orders.

In addition, China Industrial failed to diligently supervise its account executives and take adequate and timely follow-up actions against those in breach of the internal policy on recording of telephone orders and report immediately to the SFC after it became aware of its account executives’ breaches of the regulatory requirements on recording of telephone order instructions (Note 3).

In deciding the disciplinary sanction, the SFC has taken into account China Industrial’s cooperation in resolving the SFC’s concerns and its otherwise clean disciplinary record.

End

Notes:

1. China Industrial is licensed under the Securities and Futures Ordinance to carry on business in Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.
2. Contrary to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism, the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct), and the Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the SFC (Internal Control Guidelines).
3. Contrary to the Code of Conduct, the Internal Control Guidelines, and the Securities and Futures (Keeping of Records) Rules.

News captured as of:2023-08-22 17:31:09

Source: SFC