How overstating expenses could lead to licence suspension

On 12 October 2016, the SFC suspended the licence of a responsible officer (RO) for one year (SFC enforcement news available here). The RO overstated his team entertainment expenses by an amount of $3,430 by fraudulently presenting three false entertainment claim forms to his then employer.

On 10 November 2015, the RO was convicted of three counts of fraud under the Theft Ordinance. The Independent Commission Against Corruption (ICAC) referred the case to the SFC.

The SFC considers that the RO’s fraud conviction has called into question his fitness and properness to remain licensed. Licensed persons are not only required to be fit and proper before the licence is granted but they must also remain so on an ongoing basis in accordance with the Fit and Proper Guidelines (available here).

Under the Guidelines, the following are relevant to a person’s reputation, character, reliability and financial integrity (7.1.1(a)(i) of the Guidelines):

• offences relating to fraud, dishonesty or misfeasance
• relevant criminal conviction (or unresolved charges)
• censorship by a professional body
• disqualification by a court from being a director
• failure to comply with the SFC codes and guidelines or having been found culpable of market misconduct by the Market Misconduct Tribunal

Also, if there is evidence that calls into question a person’s ability to carry on the regulated activity competently, honestly and fairly (6.1.1 of the Guidelines), the SFC is likely to query whether the person is fit and proper to be licensed.

In addition, following paragraph 9 of the ICAC Sample Code of Conduct, licensed persons should ensure that all receipts (and other records) they submit to their employer or other parties (e.g. SFC, external legal counsel) in connection with their employer’s business give a true representation of the facts or events. Intentional use of documents containing false information to mislead the employer, whether for gain or not, may constitute an offence under section 9(3) of the Prevention of Bribery Ordinance.