The Securities and Futures Commission (SFC) of Hong Kong has reprimanded and fined Profitech Securities Limited $3.99 million for failures to comply with the Securities and Futures (Financial Resources) Rules (FRR) and other regulatory requirements
The SFC’s investigation found that Profitech failed to maintain its required liquid capital of $3 million in compliance with the FRR between February and June 2021 and since July 2022.
The regulator also found that Profitech had improperly repledged client securities collateral to its execution broker for 17 months for financial accommodation without a valid client standing authority and had failed to ensure that the aggregate market value of its repledged securities collateral did not exceed the repledging limit.
The SFC further found that Profitech had recklessly provided financial accommodation to two new clients for $15.6 million with borrowed funds without implementing reasonable credit controls and risk management measures. The firm also failed to notify the SFC a change in its holding company’s shareholding structure within seven business days in April 2021.
The above-mentioned failures of Profitech constituted breaches of the SFO, the Securities and Futures (Licensing and Registration) (Information) Rules, the Securities and Futures (Client Securities) Rules and the Code of Conduct.
In deciding the disciplinary sanctions against Profitech, the SFC has taken into a variety of factors, including Profitech’s repeated and prolonged failures to maintain the required liquid capital, as well as Profitech’s cooperation in resolving the SFC’s concerns.
