Money

HK brokerage firm fined for failure to detect illegal short sellings

(Xinhua)
Updated: 2010-08-28 15:12

HONG KONG -?Hong Kong's Securities and Futures Commission (SFC) said Friday it issued a reprimand to Ko's Brother Securities Company Limited (Ko's Brother) and fined it HK$250,000 ($32,140) for internal control deficiencies which were conducive to the clients' illegal short sellings.

The SFC said this disciplinary action follows an SFC investigation into intra-day short selling in derivative warrants by a client of Ko's Brother.

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During the investigation, the authority found a number of internal control deficiencies at Ko's Brother, including failure to implement adequate internal control procedures to detect and prevent intra-day short selling and inadequate supervision of staff who are left to their own devices in preventing and detecting short selling by clients.

The SFC found that Ko's Brother "turned a blind eye" to the client's short selling activities and inadequacies in the firm's internal control procedures were conducive to such illegal activities.

In deciding the penalty, the SFC said it took into account all the circumstances, including the decision of Ko's Brother to take steps to improve its systems so as to address their current inadequacies in preventing and detecting intra-day short selling.

An investor has been previously fined HK$30,000 for illegal short sellings, which were carried out by the investor's broker employed by Ko's Brother, said the SFC. ($1 equals HK$7.78)