- HK SFC fined Brilliance Asset Management Limited $3.15mn for failures to ensure short position reports (SPRs) for 4 collective investment schemes (CIS) were accurate.
- Also failed to ensure the schemes under its management complied with requirements under securities and futures (short position reporting) rules (SPR rules), notes 1, 2.
- Following two self-reports by Brilliance, HK SFC investigation found Brilliance prepared, submitted SPRs to HK SFC for these four CISs between 8 July 2016 - 30 August 2019.
- But 7,814 short positions held by these CISs were misstated or omitted in the reports.
- HK SFC found that the errors were due to Brilliance not incorporating a new prime broker in its automated program, because short positions held through the broker were omitted in its calculations of total short positions set out in the SPRs.
- And HK SFC found that Brilliance erroneously used data sources including market capitalization of A-shares and non-listed shares of the issuers in calculating whether net short positions held by the CISs exceed the 0.02% reportable threshold.
- Instead of market capitalization of Hong Kong-listed shares required by SPR rules.
- HK SFC considered Brilliance failed to act competently to ensure the SPRs it prepared would be accurate and compliant with applicable requirements under the SPR rules.
- In deciding the sanction, HK SFC considered Brilliance’s prompt remedial actions and cooperation in resolving HK SFC’s concerns and its otherwise clean disciplinary record.