- China Rise Securities Asset Management Company Ltd (China Rise) reprimanded, fined $6.3mn for regulatory breaches, internal control failures re short selling, cross trades.
- CEO placed 199 illegal short selling orders on listed securities for his personal account and a client's discretionary account from Jan.uary to May 2014 unbeknown to China Rise.
- After receiving enquiries from HKEX about some of the transactions, China Rise still failed to detect, prevent further short selling activities in the CEO's personal account.
- On 4 June 2017, CEO convicted for illegal short selling of shares in listed companies.
- China Rise also executed cross trades between the account of a member of its senior management (X) and a client’s discretionary account pursuant to X’s instructions.
- With the result that the transactions were executed at a price to X’s advantage and to the client’s detriment when compared with nominal price at time of the transactions.
- Revealed China Rise failed to put in place adequate procedures to detect and prevent illegal short selling by staff; or to implement effective internal controls to monitor cross trades between its staff members and clients that gave rise to conflicts of interest.
- And it had failed to ensure fair treatment of clients; and report the relevant cross trades to HKEX in compliance with the Rules of the Exchange on four occasions.
- Also failed to maintain proper records of order instructions and its compliance checks.
- Specifically, failed to locate dealing tickets of at least 100 orders placed by X from January to May 2014 and keep records of order instructions for over 1,000 client orders.
- Breach of code of conduct and management, supervision and internal controls guide.
- Took into account all relevant circumstances of case, including action by China Rise.
- E.g. firm took steps to remediate deficiencies; cooperated with SFC in accepting the findings and resolving disciplinary proceedings; otherwise clean disciplinary record.