Hong Kong's Securities And Futures Commission Reprimands And Fines BNP Paribas Securities (Asia) Limited $11 Million For Failing To Report Cross Trades To The Stock Exchange

The Securities and Futures Commission (SFC) has reprimanded and fined BNP Paribas Securities (Asia) Limited (BNP) a total of $11 million for its failures to report its direct business transactions (cross trades) to The Stock Exchange of Hong Kong Limited (SEHK) over a 10-year period (Notes 1 & 2).

The SFC’s investigation found that BNP failed to report a total of 4,443 pairs of cross trades to the SEHK involving a total of over $6 billion worth of shares conducted by BNP from December 2002 to January 2013. BNP’s reporting failures breached the trading requirements of the SEHK and the Code of Conduct (Notes 3 & 4).

As a licensed corporation, BNP also failed to employ effectively resources and procedures needed for the proper performance of its business, including the failure to provide the dealers responsible for the reporting at BNP with sufficient resources to enable them to discharge their reporting duties. The SFC considers BNP’s failures are particularly serious as it lasted for an extended period of time and involved a large number of trades (Note 5).

“This case demonstrates that reporting failures cannot be taken lightly. This is because market transparency and displaying accurate information to the investing public are essential not only to aid informed investment decisions but also to maintain a fair and orderly market.” the SFC’s Executive Director of Enforcement, Mr Mark Steward said.

Notes:

1. BNP is licensed under the Securities and Futures Ordinance to carry on business in Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 6 (advising on corporate finance), and Type 7 (providing automated trading services) regulated activities. BNP is also an Exchange Participant registered with the SEHK.
2. Cross trades or direct business transactions are business transacted by an Exchange Participant which acts for both the buyer and the seller of securities.
3. Rule 526 of the Rules of the Exchange requires Exchange Participants to report cross trades to the SEHK within specific timeframes.
4. General Principle 7 and paragraph 12.1 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) provide that a licensed person should comply with all regulatory requirements applicable to the conduct of its business, including the rules of any exchange of which it is a participant.
5. Under General Principles 2 and 3 of the Code of Conduct, BNP is required to conduct its business activities with due skill, care and diligence, in the best interests of its clients and the integrity of the market, and to have and employ effectively the resources and procedures which are needed for the proper performance of its business activities. Under paragraph 4.2 of the Code of Conduct, BNP is required to supervise diligently and does supervise diligently persons employed by it to conduct business on its behalf.