BOCOM International Securities to pay $19.6 million fine for internal control failures

The Hong Kong Securities and Futures Commission (SFC) announced reprimanding and fining BOCOM International Securities Limited (BISL) $19.6 million for a range of regulatory breaches, such as failures concerning the handling of third party fund deposits and the maintenance and implementation of a margin lending and margin call policy.

BISL failed to set adequate and effective controls for identification of third party deposits made into client accounts, thus failing to ensure compliance with the Guideline on Anti-Money Laundering and Counter-Terrorist Financing and various provisions in the Internal Control Guidelines and the Code of Conduct.

The SFC found that third party deposits from 2009, 2011 and 2015, made in cheques and bank transfers, were not identified until 2016. The Commission also found extensive deficiencies in its review of BISL’s margin lending and margin call policy from December 2012 to November 2016. The company failed to document and enforce a clear margin lending and margin call policy, to keep records explanations regarding deviations from the policy, proper communications with the clients. The SFC also found the company failed to ensure transactions conducted in client accounts were properly authorized and client identities are properly confirmed.

In its disciplinary action, the Commission took into account that BISL has otherwise clean record and has taken steps to revise its policy. The company has agreed to engage an independent reviewer to conduct a review of its internal controls.

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