CLSA Premium sets aside HK$5.6m as provision for NZ penalty
Hong Kong-focused Forex broker CLSA Premium Ltd (HKG:6877) has set aside about HK$5.6 million as provision for a penalty to be imposed on it by New Zealand’s Financial Markets Authority (FMA). This becomes clear by a report filed by the broker with HKEX earlier today.
On June 23, 2020, CLSA Premium New Zealand Limited (CLSAP NZ), a subsidiary of CLSA Premium, received a statement of claim filed by the FMA of New Zealand. The FMA has filed on the High Court to impose a financial penalty against CLSAP NZ for alleged breaches of the AML/CFT Act for certain transactions occurred between April 2015 and November 2018.
The FMA alleges four causes of action against CLSAP NZ under the AML/CFT Act:
- failure to conduct standard and enhanced client due diligence;
- failure to terminate business relationships;
- failure to submit suspicious transaction reports or suspicious activity reports; and
- failure to keep records.
CLSAP NZ has filed an Notice of Admission and an Agreed Statement of Facts with FMA. The date of the penalty hearing has been set for July 5, 2021.
Having sought legal advices, the directors of CLSA Premium believe that above liabilities are likely to materialise, so provision for the penalty to be imposed by FMA of NZ$1 million (equivalent to approximately HK$5.6 million) has been made in the other payables.
Let’s recall that, on September 18, 2020, CLSA Premium New Zealand Limited received a notice of decision from the Financial Markets Authority of New Zealand regarding the addition of specific conditions on its derivatives issuer licence. This move reflects CLSAP NZ’s failure to meet some of its audit and assurance obligations under the Act for year 2019.
The additional specific conditions prevent CLSAP NZ from making an offer to, or receiving further funds from, retail investors in relation to derivatives, except in certain limited circumstances. The conditions that the FMA has imposed allow CLSAP NZ to close out open positions with retail investors, or receive funds from retail investors for the purposes of meeting obligations (e.g. margin or collateral requirements) that the investor might have with CLSAP NZ.
These conditions took effect on September 22, 2020.