The Securities and Futures Commission (SFC) of Hong Kong has reprimanded and fined Tung Tai Securities Company Limited HK$900,000 for failures relating to unauthorised sales of client securities and transfers of client funds.
The SFC’s investigation found that between 6 September 2019 and 18 February 2020, Tung Tai, acting on instructions from a bogus email address similar to that of an overseas client, sold shares in the client’s account and transferred the sale proceeds totalling US$3,301,740 to three overseas bank accounts that were not designated by the client.
Apart from the incorrect email address, there were other signs of potential irregularities, including telegraphic transfer rejections by multiple banks, but Tung Tai did not act on these red flags and continued to process the fund transfers.
The SFC found that Tung Tai failed to ensure that client assets were adequately safeguarded. Tung Tai also failed to establish effective internal control procedures to protect client assets from theft, fraud and other acts of misappropriation.
In deciding the disciplinary sanctions against Tung Tai, the SFC has taken into account a variety of factors, including the seriousness of Tung Tai’s failures to put in place adequate internal controls to safeguard client assets, and Tung Tai’s taking of remedial measures to enhance order placing and trading execution procedures for the client to avoid similar incidents in the future.
The regulator noted that Tung Tai has made compensation to the client.
