The Securities and Futures Commission (SFC) has prohibited Ms Joanna Chu Lai Wa, former responsible officer (RO), director and head of dealing of Guosen Securities (HK) Brokerage Company, Limited (Guosen) from re-entering the industry for 12 months from 23 June 2020 to 22 June 2021 (Note 1).
The disciplinary action follows the SFC’s sanctions against Guosen over its failures to comply with anti-money laundering (AML) and counter financing of terrorism (CFT) regulatory requirements when handling third party fund deposits between November 2014 and December 2015 (Note 2).
The SFC found that Guosen’s breaches were attributable to Chu’s failure to discharge her duties as an RO and a member of Guosen’s senior management (Note 3).
Guosen’s internal control deficiencies in relation to third party deposits were brought to the attention of its senior management – including Chu – by its staff in 2013. However, Chu deemed that the matter was irrelevant to her and did not take any steps to ensure that the deficiencies were rectified. Her inaction contributed to Guosen’s failure to put in place adequate AML/CFT internal controls during the material time.
Chu also received records of third party deposits from Guosen’s then head of settlement from time to time. Those records showed that, contrary to Guosen’s purported policy to discourage third party deposits, it processed a significant number of third party deposits for its clients. However, Chu did not take any action and did not escalate the matter to her supervisor or other members of Guosen’s senior management, despite the substantial amount of third party deposits received.
Apart from turning a blind eye to the money laundering and terrorist financing (ML/TF) risks associated with third party deposits, Chu also failed to ensure that Guosen’s staff adhered to the procedures for assessing clients’ ML/TF risks by documenting the process as required by Guosen’s compliance manual in her capacity as one of the approvers of account opening applications.
The SFC considers that Chu’s conduct fell short of the standard required of her as an RO for a licensed corporation.
In deciding the disciplinary sanction, the SFC took into account all relevant circumstances, including that Guosen’s regulatory breaches were serious and Chu’s otherwise clean disciplinary record.
Chu, who had applied to the Securities and Futures Appeals Tribunal (SFAT) for a review of the SFC’s decision, was granted leave to withdraw her application on 23 June 2020 by the SFAT and ordered to pay the SFC’s legal costs (Note 4).
- Chu was licensed under the Securities and Futures Ordinance and approved as an RO of Guosen in respect of its Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities between 26 February 2010 and 20 February 2019, and in respect of its Type 2 (dealing in futures contracts) and Type 5 (advising on futures contracts) regulated activities between 14 March 2011 and 20 February 2019. Chu is currently not licensed by the SFC.
- Guosen was reprimanded and fined $15.2 million by the SFC. Please refer to the SFC’s press release dated 18 February 2019.
- General Principle 9 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) requires the senior management of a licensed corporation to bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the firm. Paragraph 14.1 of the Code of Conduct further provides that the senior management of a licensed corporation should properly manage the risks associated with the firm’s business.
- Please see SFAT Application No. 1 of 2020 published on the SFAT’s website at www.sfat.gov.hk.