SFC licensing and compliance hints – Sep 2014

Another case of false or misleading information – Following the conviction and fine by the Eastern Magistrates Court of a former licensed representative in January, the SFC then banned the individual in August from re-entering the industry for nine months.  The case centred on the provision of false or misleading information to the SFC, in breach of section 384 of the SFO, in two annual returns submitted in 2009. The information related to his disciplinary record. The SFC views failures in accurate reporting of disciplinary records as material.  Such records are significant in terms of a person’s fitness and properness. Licensed persons are therefore reminded that whenever they are completing disclosure questions, whether in supplements to a licence application or an annual return, they should be mindful, especially with disciplinary records, to ensure the information is  accurate, complete and up-to-date. 

You can’t have it all – The scope of Type 1 (Dealing in Securities) activity is very broad: it includes trading stocks for clients, buying and selling mutual funds and unit trusts for clients, and the placing and underwriting of securities. However,  the SFC often imposes conditions on licences, designed to limit the scope of the company’s Type 1 activities according to the business plan submitted with the licence application. Furthermore, a company with an unconditional Type 1 licence should consider whether the Type 1 activities it undertakes fall within the scope of its business plan as filed with the SFC.  If there are changes to its activities as described in the business plan, the company should notify the SFC, in addition to ensuring that it has appropriate resources and internal control policies for the new activities.

Does the SFC need to know if a licensed company or its company secretary relocate? – A licensed company needs to get the SFC’s prior approval before moving to new office premises. This includes expanding the office to include a neighbouring unit. If the company secretary only keeps the statutory books and records of the company and does not keep any records relating to the company’s regulated business, the SFC will not need to be notified if the company secretary changes its address. However, if the registered office changes, this will need to be notified to the SFC.

How many bank accounts does the company have? – A licensed company needs to notify the SFC of changes to the bank accounts used for its regulated business.  If a company has one consolidated bank account made up of accounts with different numbers, you should check whether all the accounts (including the current account) have been notified to the SFC.

CPT 2014 – As the third quarter of 2014 is about to end, it is worthwhile doing a CPT stock-take on all licensed individuals. If your company has licensed individuals who still need to collect CPT hours this year, they should take action soon.