Compliance Corner: Hong Kong, Australia, Singapore, Others

Editorial Staff, 28 June 2021


The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

Hong Kong
Hong Kong’s Securities and Futures Commission has reprimanded Deutsche Securities Asia Limited (DSAL) and fined it HK$2.45 million for issuing incorrect statements to its prime brokerage (PB) clients and delaying reporting its failures to the SFC.

The regulator said in a statement that it found that between 2006 and October 2018, due to a design defect of its front office system, DSAL issued incorrect periodic statements to its PB clients when they were holding positions regarding their entitlements to bonus shares of listed companies which had not yet become tradable by the clients.

The incorrect statements displayed these bonus shares as settled and tradable as of the ex-entitlement dates when in fact they had not become unconditional for long sale until the settlement dates.

“It appears that one of DSAL’s PB clients relied on the incorrect statements and oversold bonus shares issued by three Hong Kong-listed companies in July 2018.  Although DSAL discovered within the same month that incorrect statements had been issued to this client and became aware in the following month that the errors were caused by a system design defect, it did not report the failures to the SFC until February 2019 when its internal investigation was complete,” the SFC said.

In deciding the sanction, the SFC took into account all relevant circumstances, including the finding that DSAL’s failures lasted for 12 years, DSAL’s remedial actions and cooperation with the SFC in resolving the SFC’s concerns.

Australian Securities and Investments Commission
ASIC said late last week that it has banned Hobart-based financial advisor Hannah Jennings from providing financial services, carrying on a financial services business and controlling an entity that carries on a financial services business for four years.

The regulator found that Jennings “failed to act in the best interests of her clients by providing advice that was inappropriate in light of her clients’ relevant personal circumstances.”

The Australian Securities and Investments Commission said it reviewed advice provided by Jennings which recommended clients continue with double gearing strategies “despite knowing that clients struggled to service the borrowing arrangements.”

“Jennings had no regard to the clients’ relevant personal circumstances, their cash flow position or their ability to cover margin calls,” ASIC said. Jennings also failed to consider an exit strategy for her clients as well as appropriate personal insurance cover, it said.

The regulator said that Jennings also failed to keep proper records and that she was not adequately trained or competent to provide financial services. 

“Her lack of understanding about her legal and professional obligations as a financial advisor created additional risks to her current and future clients,” it said. 

Jennings’ banning took effect on 1 April 2021. Ms Jennings applied to the AAT for a review of ASIC’s decision but withdrew her application on 8 June, ASIC said.

Singapore Exchange Regulation (SGX RegCo) said late last week that it is expanding its range of enforcement powers and requiring issuers to have a whistleblowing policy.

The change follows a public consultation on changes to the listing rules that market participants broadly supported. The exchange said changes will enable faster enforcement outcomes, boosting confidence in Singapore’s capital markets, and be a stronger deterrent against misconduct, and enhance the protection of investors.

“The market has spoken and is demanding more public accountability more quickly. Particularly in uncertain times, we need to give investors faster answers and greater assurance. Speedy enforcement is also a stronger deterrent that will complement our other pre-emptive efforts such as our new whistleblowing framework,” Tan Boon Gin, CEO of SGX RegCo, said.

Singapore, HGX
Hg Exchange (HGX), a private securities exchange formed by an alliance of capital market intermediaries, has announced that it is a Recognised Market Operator (RMO), regulated by the Monetary Authority of Singapore.

HGX notched up a number of achivements, the organisation said, including closing its first trade in September 2020 and launching Asia’s first digital whiskey-based asset-backed security in January 2021. Thirteen different products have been listed with a total average monthly trading volume exceeding $500,000 in the last six months, it said.

HGX has built a product pipeline of capital market products, with funds, loans, luxury assets, and real estate under evaluation for future listing.

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