Licence revocation for window-dressing of liquid capital

On 4 February 2019, the SFC announced that it had revoked the licence of W. Falcon Asset Management (Asia) Limited (Falcon) for the following breaches in connection with its window-dressing of its liquid capital, the mastermind of which, according to the SFC, was the company’s director (Director) and sole shareholder:

1.  Providing false and misleading information in its licence application and financial returns from June 2014 to June 2017

   The window-dressing involves certain cheques drawn by the Director which were subsequently dishonoured. If Falcon’s liquid capital did not include those dishonoured cheques, it would firstly not have been granted a licence and secondly had a liquid capital deficit at each month-end for a three-year period from June 2014.

2.  Breaching the terms of a restriction notice

   In May 2017, the Director guaranteed a loan taken out in the name of Falcon. Two months later, the SFC issued a restriction notice against Falcon after a self-report by Falcon that its liquid capital had dropped below the required level. Subsequently, Falcon defaulted on repayment of the loan and proceeded to enter into a debenture with the lender, thereby subjecting its assets to a floating charge, contrary to the terms of the restriction notice.

3.  Late notification of the resignation of the Director 

   Both Falcon and the Director were under an obligation to notify the SFC within seven business days after the change, but the SFC received such notification from Falcon 20 days after it was due. 

In addition, Falcon was found to be in breach of various provisions in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct), including General Principle (GP) 1 honesty and fairness, GP2 diligence and GP7 compliance, as well as 12.1 of the Code of Conduct relating to compliance in general. The SFC considers the misconduct to be egregious and serious. All these breaches reflected adversely on the fitness and properness of Falcon to remain licensed and so its licence was revoked in order to protect the investing public.