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A former licensee was convicted by the Eastern Magistrates’ Court on 3 September 2020 of providing false or misleading information to the Hong Kong Securities and Futures Commission (SFC), contrary to ss.383, 384 and 135(3) of the Securities and Futures Ordinance (SFO). The former licensee pleaded guilty to the charges and was fined $36,000 and ordered to pay the SFC’s investigation costs.
The case serves as another reminder of the importance of making complete, true and correct disclosures to the SFC and making timely reports if there are changes to information previously provided to the SFC.
The SFC’s investigation revealed that the individual did not disclose that he was subject to investigation in two separate licence applications to the SFC in August 2017. Then, after becoming a licensee, he did not disclose in his annual return in March 2018 that he had been charged with a criminal offence and was still under investigation at the relevant time. Finally, he did not submit any notifications to the SFC in connection with such events within the timeframe required under the Securities and Futures (Licensing and Registration) (Information) Rules (Information Rules).
It is worth noting in this regard that the scope of the disclosure questions on disciplinary actions and investigations in the SFC application forms and the ongoing notification obligation in the Information Rules is not limited to those conducted by regulatory bodies of stock or futures exchanges, but extends to disciplinary actions and investigations conducted by professional or regulatory bodies of a trade, business or profession. Further, these questions do not just relate to disciplinary actions and investigations in which the individual is involved personally, but also extend to companies of / in which the individual is or has ever been (a) a director, (b) involved in the management, and (c) a substantial shareholder.
Providing information to the SFC should never be treated as a mere formality. It is essential that licence applicants and licensees always review draft documents for complete accuracy because as we can see from this case providing incorrect or misleading information to the SFC can have very serious consequences for an individual.
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