Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Enlighten Securities Limited (ESL) $5 million for internal control failures over securities margin financing.
The SFC has also suspended the licence of Mr Denny Kua Kong Chak – a responsible officer and a manager-in-charge of ESL, and a member of the firm’s senior management – for seven months from 21 March 2025 to 20 October 2025.
The regulatory investigation revealed deficiencies in ESL’s risk management controls and practices over securities margin financing between 1 May 2020 and 30 November 2022 (Relevant Period).
The SFC found that ESL provided financial accommodation to margin clients who had long outstanding margin shortfalls and poor history of settling margin calls, and failed to implement prudent measures to manage the risks involved.
Specifically, ESL failed to:
- set triggers for stopping further securities purchases by margin clients with insufficient account equity;
- effectively manage margin calls and/or exercise forced liquidation on margin clients and document the explanation for deviation from its margin lending and margin call policy;
- properly manage its margin clients’ credit limits; and
- promptly collect margin due by clients.
ESL’s failures fell short of the standards expected of it under the Internal Control Guidelines, the Code of Conduct and the Guidelines for Securities Margin Financing Activities.
The SFC considers that ESL’s failures were attributable to Kua’s failure to discharge his duties as a responsible officer and a member of the senior management of ESL during the Relevant Period.
In deciding the disciplinary sanctions against ESL and Kua, the SFC took into account a wide variety of factors, including ESL’s financial position and its decision to cease business, as well as the need to send a strong deterrent message to remind the market that such failures are not acceptable. ESL and Kua have otherwise clean disciplinary records with the SFC.
