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The Securities and Futures Commission (SFC) has reprimanded DBS Vickers (Hong Kong) Limited (DBSVHK) and fined it $2 million for regulatory breaches and internal control failings relating to under-segregation of client money.
The disciplinary action follows an SFC investigation into three self-reports by DBSVHK about possible non-compliance with the Securities and Futures (Client Money) Rules (Client Money Rules).
During the period from June 2013 to September 2015, DBSVHK used aggregated client monies in segregated client accounts to meet settlement obligations. In doing so, DBSVHK effectively used excess margin deposits of some clients to fulfil the margin requirement of other clients with unmet margin calls, constituting a breach of the Client Money Rules as well as the SFC’s Code of Conduct.
The SFC found that DBSVHK failed to have adequate internal controls and management supervision in place to prevent under-segregation of client money and to ensure that client assets were appropriately safeguarded. In particular, DBSVHK did not have sufficient controls governing certain processes as well as process change.
In deciding the disciplinary sanction, the SFC took into account that:
- there is no evidence that any client of DBSVHK has suffered loss as a result of the non-compliance;
- DBSVHK engaged an independent reviewer to review its client money handling process and has taken steps to remediate a number of its internal control deficiencies identified in the review;
- DBSVHK has co-operated with the SFC in resolving the disciplinary proceedings; and
- DBSVHK has an otherwise clean disciplinary record.