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SFC reprimands and fines Central Wealth Securities Investment Limited $1 million for breaching Financial Resources Rules

Issue date: 2023-12-18 16:30:00

The Securities and Futures Commission (SFC) has reprimanded and fined Central Wealth Securities Investment Limited (Central Wealth) $1 million for failures in complying with the Securities and Futures (Financial Resources) Rules (FRR) (Note 1).

The SFC found that Central Wealth made various accounting and calculation errors in the financial returns submitted to the SFC under the FRR which resulted in overstating its liquid capital between April 2019 and December 2020 (Relevant Period).  After eliminating the errors, it came to light that Central Wealth’s required liquid capital was in deficit - ranging from $1.62 million to $49.08 million - for eight months during the Relevant Period, contrary to FRR’s requirement (Note 2). 

Central Wealth’s failure to ensure the accuracy of the financial returns was mainly attributable to its failure to appoint qualified and competent persons to prepare and review the financial returns.  In particular, the preparers of the financial returns did not have sufficient knowledge and experience to perform their roles.  In addition, Central Wealth’s responsible officers responsible for reviewing and signing off the financial returns were not familiar with the FRR requirements and failed to identify the errors in the financial returns submitted to the SFC.

The SFC is of the view that Central Wealth’s conduct was in breach of the FRR and Code of Conduct (Notes 3 & 4).

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

• the duration and extent of Central Wealth’s failures;
• Central Wealth engaged an independent reviewer upon the SFC’s request to assess its systems and controls over financial reporting and to verify the accuracy of the financial returns it prepared;
• Central Wealth’s remedial measures;
• Central Wealth’s cooperation with the SFC in resolving the SFC’s concerns; and
• Central Wealth’s otherwise clean disciplinary record.

End

Notes:

1. Central Wealth is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.
2. Section 6 of the FRR provides that a licensed corporation must at all times maintain liquid capital which is not less than its required liquid capital. 
3. Please refer to the Statement of Disciplinary Action for the relevant regulatory requirements.
4. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

News captured as of:2023-12-18 16:30:00

Source: SFC