Deutsche Securities Asia Receives Strong Fine from Hong Kong’s SFC


June 24, 2021, | AtoZ MarketsThe Hong Kong financial market watchdog , the Securities and Futures Commission (SFC), has fined Deutsche Securities Asia Limited (DSAL) with 2.45 million Hong Kong’s dollars for sending false information to its customers .

The SFC found that between 2006 and October 2018, due to a design defect of its front office system, DSAL issued incorrect periodic statements to its PB clients when they were holding positions regarding their entitlements to bonus shares of listed companies that had not yet become tradable by the clients.

The incorrect statements displayed these bonus shares as settled and tradable as of the ex-entitlement dates when in fact they had not become unconditional for long sale until the settlement dates.

SFC Made a Detailed Study of the Case

It appears that one of DSAL’s PB clients relied on the incorrect statements and oversold bonus shares issued by three Hong Kong-listed companies in July 2018.

Although DSAL discovered within the same month that incorrect statements had been issued to this client and became aware in the following month that the errors were caused by a system design defect, it did not report the failures to the SFC until February 2019 when its internal investigation was complete.

The SFC is of the view that DSAL’s above-mentioned failures constitute breaches of the Code of Conduct.

In deciding the sanction, the SFC took into account all relevant circumstances, including the finding that DSAL’s failures lasted for 12 years, DSAL’s remedial actions and cooperation with the SFC in resolving the SFC’s concerns.

Read here all the sanction imposed

Impact of the Error

DSAL had likely issued Impacted Statements to some of its PB clients since the FO System was implemented in 2006, until the Error was remedied in November 2018:

  • 34 PB clients received Impacted Statements from DSAL between
    January and October 2018.
  • 75 PB clients likely received Impacted Statements between 2011 and
    2017
  • DSAL was unable to identify the number of PB clients who may have received Impacted Statements before 2011 since the data is no longer available.

The SFC is the only Hong Kong financial regulator given the mandate to educate the investing public.

 

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