Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Central Wealth Securities Investment Limited $1 million for failing to comply with the Securities and Futures (Financial Resources) Rules (FRR).
The SFC found that Central Wealth made various accounting and calculation errors in the financial returns submitted to the SFC under the FRR, which resulted in its liquid capital being overstated between April 2019 and December 2020. After the errors were eliminated, it was found that Central Wealth required Liquid capital was in deficit – ranging from $1.62 million to $49.08 million – for eight months during the Relevant Period, contrary to the FRR requirement.
Central Wealth’s failure to ensure the accuracy of the financial returns was mainly due to its failure to appoint qualified and competent persons to prepare and review the financial returns. In particular, the authors of the financial returns did not have sufficient knowledge and experience to perform their roles.
In addition, the relevant officers of Central Wealth responsible for checking and signing the financial statements were not familiar with the requirements of the FRR and failed to detect the errors in the financial statements submitted to the SFC.
The regulator found that Central Wealth’s conduct breached the FRR and the Code of Conduct.
In deciding the penalty, the SFC took into account a variety of circumstances, including the duration and extent of Central Wealth’s failures, and Central Wealth’s cooperation with the SFC to resolve the SFC’s concerns, as well as the otherwise Central Wealth’s clean disciplinary record.