The Securities and Futures Commission (SFC) has prohibited Mr Chan Yiu Ting, a former account executive of China Tonghai Securities Limited (CTSL), formerly known as Oceanwide Securities Company Limited and Quam Securities Company Limited, from re-entering the industry for 18 months from 12 August 2020 to 11 February 2022, for breach of the SFC’s Code of Conduct (Note 1).
The disciplinary action follows an SFC investigation which found that between April 2011 and June 2018, Chan effected about 6,031 trades involving over $573 million worth of shares in a client’s account on a discretionary basis without obtaining the client’s prior written authorization.
In doing so, he also failed to comply with the policies and procedures of CTSL in relation to discretionary accounts.
The SFC considers that Chan had failed to act with due skill, care and diligence and in the best interests of the client. The absence of written authorization for discretionary transactions was prejudicial to the client’s interests as Chan’s employer was prevented from monitoring and supervising the operation of the account and the client was deprived of protection against the risk of unauthorized trades carried out in her account (Notes 2 & 3).
In deciding on the disciplinary sanction, the SFC took into account all relevant circumstances, including the duration of Chan’s misconduct and his otherwise clean disciplinary record.
- Chan was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities and accredited to CTSL from 3 May 2011 to 26 July 2018. Chan is currently not licensed by the SFC.
- General Principle 2 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that a licensed person should act with due skill, care and diligence, in the best interests of its clients and integrity of the market in conducting its business activities.
- Paragraph 7.1(a)(ii) of the Code of Conduct requires a licensed person to obtain a written authorization from its client before effecting transactions for a client without the client’s specific authorization. Paragraph 7.1(c) of Code of Conduct requires a licensed person who has received an authority described under paragraph 7.1(a)(ii) to designate such accounts as “discretionary accounts”. Paragraph 7.1(d) of the Code of Conduct requires the senior management of a licensed person to approve the opening of discretionary accounts.