The Securities and Futures Commission (SFC) has banned Mr Lai Wing Fat, a former licensed representative of Black Marble Securities Limited, from re-entering the industry for 20 months from 5 July 2020 to 4 March 2022 for breaches of the SFC’s Code of Conduct (Notes 1 to 4).
The disciplinary action follows an SFC investigation which found that between August 2016 and June 2017, Lai effected transactions in a client’s account on a discretionary basis without obtaining the client’s prior written authorization. Lai also effected discretionary transactions in the accounts of three other clients without their prior written authorizations.
The SFC also found that Lai had failed to explain the Chinese account opening documents and risk disclosure statements to the client to ensure the client understood the content and relevant risks before signing the documents, even though Lai was aware that the client had difficulty understanding the Chinese documents.
The SFC considers that Lai had failed to act with due skill, care and diligence and in the best interests of the clients. The absence of written authorizations for discretionary transactions was prejudicial to clients’ interests as Lai’s employer was prevented from monitoring and supervising the operation of the accounts and the clients were deprived of protection against the risk of unauthorized trades carried out in their accounts.
In deciding the sanction, the SFC took into account all relevant circumstances, including Lai’s otherwise clean disciplinary record.
- Lai was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) regulated activity and accredited to Black Marble Securities Limited from 22 April 2016 to 9 October 2017. Lai 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 the 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 a client before effecting transactions for a client without the client’s specific authorization. Paragraph 7.1(c) of the 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 to approve the opening of discretionary accounts.
- Paragraph 6.1 of the Code of Conduct requires a licensed or registered person to enter into a written agreement (Client Agreement) with each client before services are provided to the client. The Client Agreement should be in Chinese or English according to the language preference of the client, as should any other agreement, authority, risk disclosure or supporting document. Licensed or registered persons should provide a copy of these documents to the client and draw to the client’s attention the relevant risks.