HK enforcement case shows continued focus on conduct breaches

The SFC in Hong Kong recently announced that a former employee of Philip Securities and Philip Commodities was being banned from the industry for 9 months because of his unauthorised access to information on the IT system of his employer.  It would appear, from the public notice of the action (set out below), that there was nothing to suggest the former employee breached a specific provision of the SFO, rather the SFC's concern relates to a breach of general principals.

We have been saying for some time that firms and individuals licensed by the SFC need to bear in mind not only specific trading or markets issues, like insider dealing or market manipulation, but also more generic issues involving potential dishonest conduct or conduct where a firm policy is not adhered to.

The full text of the SFC announcement in this case is below:

SFC bans Leung Kau Fung for nine months

7 Nov 2012

The Securities and Futures Commission (SFC) has banned Mr Leung Kau Fung from re-entering the industry for nine months from 7 November 2012 to 6 August 2013 (Note 1).

The disciplinary action follows an SFC investigation which found that between March and November 2010, Leung, who was then a licensed representative, accessed his employer’s client information system with other staff members’ usernames and passwords without permission.

Leung claimed that he wanted to find out the performance of other account executives through the system.

Leung knew accessing the information was restricted to authorized users and that he was not an authorized user because no username or password was assigned to him. For this reason, Leung did not act honestly in accessing the information system.

The SFC considers Leung not a fit and proper person to be licensed and in deciding the sanction, the SFC took into account:

• Leung’s access to the information system lasted for nine months until its discovery by his employer;
• honesty is fundamental to the character of a licensed representative; and
• his clean disciplinary record.

End