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Screenshot of a breaking news alert e-mail from Q2 2017
The Hong Kong Securities and Futures Commission (SFC) announced that it has reprimanded CN Capital Management Limited (CN Capital) and fined it $1,000,000 for failing to maintain an effective compliance function and satisfactory internal controls concerning employee account dealing.
The SFC has also reprimanded its responsible officers, Mr George Chan Yee Lee and Mr Stephen Ng Wing Leung and fined them $100,000 each for failing to comply with the employee account dealing requirements under the Fund Manager Code of Conduct, breaching the basic principle that persons engaged in fund management business, when transacting for themselves, must give their clients priority and avoid conflicts of interest.
The SFC’s investigation revealed that, between January 2011 and October 2016:
- none of the staff members of CN Capital had disclosed their personal investment holdings to CN Capital in writing;
- Chan and Ng conducted a total of 3,188 personal trades without obtaining any written pre-clearance from the designated officer of CN Capital;
- in 619 incidents, Chan or Ng held their personal investments for less than 30 days without prior written approval from the designated officer; and
- a total of 996 personal trades of Chan and Ng were conducted in the same stock and on the same day as the transactions conducted for the fund managed by CN Capital.
In deciding the sanctions, the SFC took into account all the circumstances including:
- CN Capital, Chan and Ng self-reported the regulatory breaches and failures to the SFC;
- they co-operated with the SFC in resolving the SFC’s concerns;
- they have taken remedial measures to rectify the breaches and strengthen CN Capital’s internal controls and systems;
- there is no evidence to suggest any front-running activities;
- there does not appear to be any client impact arising from the personal trades of Chan and Ng; and
- CN Capital, Chan and Ng have no disciplinary record with the SFC.