Hong Kong Securities And Futures Commission Reprimands And Fines Fulbright Securities Limited $3.6 Million

The Securities and Futures Commission (SFC) has reprimanded Fulbright Securities Limited (Fulbright) and fined it $3.6 million for internal control failures relating to short selling and for failing to report related short selling incidents to the SFC in a timely manner as required by the SFC’s Code of Conduct (Notes 1 & 2).

The SFC’s investigation found that between October 2015 and March 2016, there were at least 93 instances of short sales executed by Fulbright which resulted from its failure to put in place effective internal control procedures to detect and prevent illegal short selling.

The SFC also found that Fulbright failed to report these incidents to the SFC immediately upon discovering them.

In deciding the disciplinary sanction, the SFC took into account all relevant circumstances of the case, including that:

• adequate and effective internal control systems are fundamental to the fitness and properness of a licensed corporation;
• Fulbright’s short selling failures lasted for at least six months;
• Fulbright’s cooperation in resolving the SFC’s concerns and acceptance of the findings and disciplinary action of the SFC;
• Fulbright had taken measures to rectify its internal control deficiencies in relation to the detection and prevention of short selling after the incidents; and
• Fulbright had an otherwise clean disciplinary record.

Notes:

1. Fulbright is licensed under the Securities and Futures Ordinance to carry on business in Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.
2. Under paragraph 12.5 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct), a licensed or registered person is required to report to the SFC immediately on the happening of any material breach, infringement of or non-compliance with any law, rules, regulations and codes administered or issued by the SFC, or where it suspects any such breach, infringement or non-compliance whether by itself or persons it employs or appoints to conduct business with clients or other licensed persons.