HK regulator imposes $1M fine on Central Wealth Securities Investment Limited
Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Central Wealth Securities Investment Limited $1 million for failures in complying with the Securities and Futures (Financial Resources) Rules (FRR).
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. 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.
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 regulator found that Central Wealth’s conduct was in breach of the FRR and Code of Conduct.
In deciding the penalty, the SFC has taken into account a variety of circumstances, including the duration and extent of Central Wealth’s failures, as well as Central Wealth’s cooperation with the SFC in resolving the SFC’s concerns, as well as Central Wealth’s otherwise clean disciplinary record.