• HK SFC fined Fulbright Securities $3.6 mn for internal control failures relating to short selling and for failing to report related short selling incidents to SFC in timely manner.

Findings

• From October 2015 to March 2016, there were at least 93 instances of short sales executed by Fulbright which resulted from its failure to put in place effective internal controls.
• Control procedures should have been in place to detect, prevent illegal short selling.
• Fulbright failed to report these incidents to SFC immediately upon discovering them.

Sanction

• In deciding the disciplinary sanction, all relevant circumstances taken into account.
• Included that adequate, effective internal control systems fundamental to fitness and properness of licensed corporation and short selling failures lasted for at least 6 months.
• However Fulbright cooperated in resolving SFC’s concerns and accepted the findings.
• Also took into account Fulbright had taken measures to rectify its internal control deficiencies in relation to detection and prevention of short selling after the incidents.
• Finally, it was noted that Fulbright had an otherwise clean disciplinary record.