The Securities and Futures Commission (SFC) has banned Mr Roger Albert John and Mr Hamish Gordon Cruden, both former directors and responsible officers of Salisbury Securities Limited (Salisbury), from re-entering the industry for life (Notes 1 & 2).
The disciplinary actions follow an SFC investigation which found that Salisbury:
- misused or misapplied securities and sale proceeds belonging to other clients to settle another client’s instructions and to discharge its own operational expenses (Notes 3 & 4);
- failed to maintain the required minimum level of liquid capital from April 2012 to February 2013 (Note 5); and
- provided false and misleading information to the SFC about the level of its liquid capital in financial returns submitted to the SFC.
The SFC investigation found that John was directly responsible for Salisbury’s misconduct in that he authorized the use of securities and monies belonging to other clients for the settlement of another client’s instructions and for the discharge of Salisbury’s operational expenses and his own personal expenses.
John also masterminded the window dressing activities of Salisbury’s liquid capital and the submission of false and misleading financial returns to the SFC.
The SFC also found that Cruden, who moved to Manila in 2011 but remained as a director and responsible officer of Salisbury, nevertheless failed to keep himself informed as to the business of Salisbury and did not visit Salisbury’s office despite making regular trips back to Hong Kong. As part of Salisbury’s senior management, Cruden’s failure to participate at all in the management of Salisbury contributed to the breaches and failures of the company for which he must be equally responsible.
The disciplinary actions against John and Cruden follow swift action by the SFC in June 2013 to obtain a winding up order from the court and to close down Salisbury’s business after the issuance of an urgent restriction notice in March 2013 (Note 6).
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Notes:
- Salisbury was licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities. On 28 August 2013, the Court of First Instance ordered that Salisbury be wound up. Please see the SFC’s press release dated 28 August 2013.
- John and Cruden were licensed under the SFO to carry on Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities. Their licences were revoked on 30 August 2013.
- Section 4 of the Securities and Futures (Client Money) Rules requires a licensed corporation who receives or holds client money to establish and maintain segregated accounts with an authorized financial institution and to designate such accounts as trust account or client account.
- Section 10(1) of the Securities and Futures (Client Securities) Rules requires an intermediary to reasonably ensure that client securities are not deposited, transferred, lent, pledged, re-pledged or otherwise dealt with.
- Section 6(1) of the Securities and Futures (Financial Resources) Rules require a licensed corporation to maintain at all times no less than the minimum required liquid capital. Schedule 1 of the Securities and Futures (Financial Resources) Rules set out in Table 2 the required liquid capital. The required liquid capital for Salisbury was $3 million.
- On 28 June 2013, the SFC obtained orders from the Court of First instance to appoint provisional liquidators for Salisbury after filing a petition to the court earlier to wind up Salisbury under section 212 of the SFO. The SFC’s restriction notice against Salisbury was issued on 18 March 2013 under sections 204 and 205 of the SFO. Please see the SFC’s press releases dated 28 June 2013 and 19 March 2013.
A copy of the Statement of Disciplinary Action is available on the SFC website