The Hong Kong Securities and Futures Commission has reprimanded and fined a Hong Kong securities firm for a series of breaches.
The Hong Kong Securities and Futures Commission (SFC) has punished Yuanta Securities (Hong Kong) $4 million for failing to disclose the actual execution price and properly and adequately disclose the financial gains it made whilst handling bond transactions for its clients, according to a statement on Monday.
An SFC investigation found that from 1 July to 31 December 2012, Yuanta Securities, acting as its clients’ agent, made approximately $3.1 million in commission by marking-up or marking-down the execution prices in some of the 256 bond transactions for 96 clients without making proper and accurate disclosure to the clients.
Marking-Up the Price
After receiving a client’s buy order, Yuanta Securities’ financial product team would buy the product through a counterparty and mark-up the trading price before passing it to the sales team which would further mark-up the price before selling it to a client. The same approach was used in executing sell orders by marking down the trading prices.
Whilst some of the clients appeared to be aware of the amount of the commission the sales team earned from the trades, such commission was not always properly disclosed in the trading instruction form and was not mentioned in the daily statements sent to the clients. Furthermore, the clients were charged additional fees by Yuanta Securities without their knowledge and consent since they were not informed of the financial product team’s mark-up/mark-down.
Conflicts of Intererst
The SFC therefore concluded that Yuanta Securities failed to properly avoid and disclose conflicts of interest and treat its clients fairly or act in their best interests. The firm did not provide accurate information to the clients regarding the actual execution price and the full extent of the fees or charges it made in respect of the transactions and set out the actual execution price and the commission and charges in the daily statements sent to clients as required under the law.
