SFC issues restriction notice on W. Falcon Asset Management (Asia) Limited

Hong Kong SFC

The Hong Kong Securities and Futures Commission (SFC) has issued a Restriction Notice on W. Falcon Asset Management (Asia) Limited (W. Falcon) to safeguard the assets of the firm and its clients, and to protect the interest of its clients and the investing public.

The restriction notice is to prohibit the firm, without the SFC’s prior written consent, from carrying on all regulated activities for which it is licensed, disposing of or dealing with any assets held by it or held on behalf of its clients, and assisting, counselling or procuring another person to dispose of or deal with any such property, except for the return of any client money, client securities or any other client assets held by the firm as directed by the relevant client.

The SFC’s action follows a self-report by W. Falcon informing the SFC that its liquid capital had dropped below the amount required under the Securities and Futures (Financial Resources) Rules. This was caused by a dishonoured cheque, in favour of W. Falcon, issued by the sole shareholder and a director of the firm.

The SFC then initiated a review which found that W. Falcon appeared to have a practice of window-dressing its month-end liquid capital reported to the SFC on repeated occasions, in each case through a cheque issued by that director in favour of W. Falcon at month-end. The cheque was then dishonoured on the first business day after the month-end date. If the liquid capital of W. Falcon did not include the amount of the dishonoured cheques, W. Falcon would have had a liquid capital deficit on each of those month-end dates.

That sole shareholder and director of the firm was allegedly the only authorised signatory for all withdrawals from the firm’s bank accounts and client bank accounts for external payments, without the control of any Responsible Officers or its other employees. None of the Responsible Officers were authorised to operate any of the firm’s bank accounts.

In light of the serious internal control problems at W. Falcon, the SFC has doubts over the firm’s financial integrity and its ability to adequately safeguard client assets, as well as its fitness and properness to remain licensed. The SFC investigation is ongoing.

Clients of W. Falcon are advised to contact the firm for the return of their assets immediately.

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