The Securities and Futures Commission (SFC) announced on Wednesday that it had fined Guosen Securities (HK) Brokerage Company, Limited (Guosen) HK$2.8 million for its failure to handle client assets and accounts properly.

SFC Fines Guosen Securities After Breach of Securities Rules

According to the SFC’s investigation, the licensed entity authorized to carry on securities and futures trading activities and investment advisory breached two of the Client Securities Rules (CSR). Between January and March 2021, Guosen used expired entitlements on more than 1,000 customers to obtain financial accommodation by re-submitting their securities collateral with a bank as collateral. In addition, between May and November 2020, Guosen presented incomplete statements presenting incorrect information regarding 930 customers.

In its final decision to fine the company, the SFC took into account the corrective actions taken by Guosen and the self-reporting of violations. Additionally, the incidents are isolated, and customers have not suffered any losses due to the investigated violations.

The SFC Wants to Mitigate Future Dealing Risks

In an effort to reduce the risks associated with the futures industry and regulated futures brokers, the SFC has proposed several new market mechanisms that are currently the subject of open consultation.

In November, Hong Kong’s regulatory watchdog published a consultation paper proposing risk management guidelines for authorized trading firms in the futures market. The proposals relate to better control and risk management, mandatory due diligence reviews, and more strict rules for margin calls.

“Recent shocks in the financial and commodity futures markets have underscored the challenges futures brokers face in times of market volatility. The proposed risk management guidelines aim to provide timely guidance to futures brokers to help them better manage the risks relating to their business,” Julia Leung, the Deputy Chief Executive Officer and Executive Director of Intermediaries at SFC, said.

On top of that, the SFC is looking at regulating cryptocurrency markets. In October, the Commission confirmed its intentions to launch a virtual assets (VAs) consultation and allow retail investors to access this market through exchange -traded funds (ETFs).