Those in the financial industry would be familiar with the annual return of licensed representatives required to be submitted to the Securities and Futures Commission (“SFC“) every year. There is a part in the annual return for the licensed representatives to declare whether there is/are any change(s) to the information provided to the SFC previously (usually by the initial application for licence and the annual return submitted every year).
A former licensee, Mr. Roger Tsui Chi Fung (“Tsui“), was convicted of two counts of providing false or misleading information to the SFC, contrary to s.384 of the Securities and Futures Ordinance (“SFO“), on 15 January 2014. Tsui pleaded guilty to the charges and was fined $8,000 and ordered to pay the SFC’s investigation costs.
The SFC’s investigation revealed that the Financial Industry Regulatory Authority of the United States (FINRA), a US regulator of brokers, had disciplined and sanctioned Tsui in January 2008 for possession of unauthorized materials while attending a NASD General Securities Representative Qualification Examination. However, this was not disclosed in the annual returns Tsui submitted to the SFC covering the relevant period where Tsui declared that there was no change to the information he provided to the SFC previously.
According to s.384 of the SFO, any person who provides to a specified recipient (including the SFC and the Stock Exchange, etc.) any information that is false or misleading in a material particular commits an offence and is liable to a fine of up to $1 million and to imprisonment of up to two years.
The SFC has emphasised that in considering whether or not a licensee remains fit and proper to be licensed, it places great weight on the information regarding a licensee’s disciplinary record, both in Hong Kong and elsewhere.
It is worth mentioning that from the application form for licensed representatives, it can be seen that the “disciplinary record” that the SFC is concerned about is not limited to those relating to regulatory bodies for stock or futures exchange (like FINRA in the present case), but any professional or regulatory body in relation to any trade business or profession. The scope of information that SFC is concerned about is actually much wider than only the disciplinary record. It also includes those relating to the financial status, character and mental health of the licensee.
The ambit of s.384 of the SFO is wide. Apart from the intermediaries under the SFC’s supervision, the SFC has also prosecuted various listed companies and their officers for providing false or misleading information to the regulators in their periodic reports and announcements.
The article below concerns the SFC disciplining HSBC Securities Brokers (Asia) Limited for providing inaccurate information in its licence application. While the provision relied on by the SFC in that case is different (the SFC relied on s.194 in that case), both cases are concerned with the accuracy of information provided to the regulators.
Providing information to the regulators should never be treated as just a matter of formality. As a matter of good practice, before submitting any information to the regulators, extra care should be taken to ensure that such information is correct and remains to be correct.