Hong Kong's Securities And Futures Appeals Tribunal Affirms Securities And Futures Commission Decision To Revoke Approval Of Miranda Sham Sze Wai As Responsible Officer Over Internal Control Failures

The Securities and Futures Appeals Tribunal (SFAT) today affirmed the decision of the Securities and Futures Commission (SFC) to revoke the approval of Ms Miranda Sham Sze Wai to act as a responsible officer over findings that she was involved in serious internal control deficiencies at Ping An of China Securities (Hong Kong) Company Limited (Ping An) between August 2010 and April 2011 (Notes 1 & 2).

The SFC’s decision followed an earlier disciplinary action against Ping An (Note 3).

The SFC alleged that Sham, who was also in charge of Ping An’s compliance function between mid-October 2010 and March 2011, should have identified and reported to the SFC and the Joint Financial Intelligence Unit suspicious transactions in a timely manner but failed to do so (Notes 4, 5 & 6).

Sham also failed to establish anti-money laundering internal control procedures for Ping An and provide anti-money laundering training to its staff (Notes 7 & 8).

Furthermore, she failed to establish and follow appropriate and effective procedures to protect client assets in effecting payments, nor communicated and enforced Ping An’s internal policies on employee dealings and account opening procedures.

In deciding the disciplinary sanction, the SFC took into account all relevant circumstances including Sham’s otherwise clean record.

Notes:

1. Sham was licensed under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 2 (dealing in futures contracts) and Type 4 (advising on securities) regulated activities. Sham was accredited to Ping An as a responsible officer between 30 July 2009 and 19 August 2011.
2. The SFAT was presided over by the Hon Justice Suffiad, Chairman of the SFAT. The SFAT’s reasons for determination is available on its website at www.sfat.gov.hk.
3. Ping An was reprimanded by the SFC and fined $6 million in July 2014 over internal control deficiencies and other matters. Please refer to the SFC’s press release dated 9 July 2014.
4. Sham oversaw Ping An’s compliance function during the material period as the previous compliance officer resigned in October 2010 and his replacement did not arrive until almost five months later.
5. The Joint Financial Intelligence Unit, which receives reports of suspicious financial activities, is jointly run by staff of the Hong Kong Police Force and the Hong Kong Customs and Excise Department.
6. Section 25A of the Organized and Serious Crimes Ordinance requires a person who suspects that any property represents proceeds of, or was used in connection with or is intended to be used in connection with, an indictable offence to disclose that suspicion to an authorized officer “as soon as it is reasonable for him to do so”.
7. During the relevant period, the “Prevention of Money Laundering and Terrorist Financing Guidance Note”, published by the SFC in September 2009 under section 399 of the SFO, was in force. From 1 April 2012, it was superseded by the “Guideline on Anti-Money Laundering and Counter-Terrorist Financing” and the “Prevention of Money Laundering and Terrorist Financing Guideline” issued by the SFC. 
8. Licensed corporations should have proper systems and controls in place for the identification and reporting of suspicious transactions. The first and foremost step is to gain sufficient knowledge about a customer’s business and financial circumstances (through customer due diligence and ongoing monitoring) to recognise that a transaction, or a series of transactions, is unusual. There should also be procedures in place for reporting internally by escalation to senior management and reporting externally to the Joint Financial Intelligence Unit.