SFC fines GEO Securities Ltd HK$6.3m for regulatory breaches in 2014-15
SFC reprimands and fines GEO Securities Limited $6.3 million for regulatory breaches
Issue date: 2021-03-23 16:30:00
The Securities and Futures Commission (SFC) has reprimanded and fined GEO Securities Limited (GEO) $6.3 million for breaching its licensing conditions and failures related to the sale of unlisted bonds (Note 1).
The disciplinary action followed an SFC investigation which found that GEO had:
- provided discretionary account management services to eight clients in return for an annual management fee between 1 July 2014 and 15 June 2015; and
- introduced 36 clients directly to four listed companies to subscribe for their unlisted bonds totalling about $108 million between 28 October 2014 and 16 November 2015 (Note 2).
The SFC also found serious deficiencies in GEO’s systems and controls. Specifically, the SFC found that GEO failed to:
- conduct adequate product due diligence on the unlisted bonds before recommending them to clients;
- put in place an effective system to assess its clients’ risk tolerance and ensure the recommendations and/or solicitations made to its clients in relation to the unlisted bonds were suitable for and reasonable for the clients;
- maintain any documentary records of the investment advice or recommendations given to its clients nor provide them with a copy of the written advice; and
- make disclosures to clients of the commission it received for the successful placement of the unlisted bonds (Note 3).
In deciding the sanction, the SFC took into account that:
- no client appeared to have suffered losses from GEO’s distribution of the unlisted bonds;
- GEO cooperated with the SFC to resolve the SFC’s regulatory concerns;
- in resolving the SFC’s concerns, GEO agreed to engage an independent reviewer to review its internal controls; and
- GEO has an otherwise clean disciplinary record.
- GEO Securities Limited is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities.
- GEO’s Type 1 licence was subject to the following conditions between 3 May 2013 and 22 March 2016: (a) GEO shall not hold client assets; and (b) for Type 1 regulated activity, GEO shall not conduct business other than: (i) communicating offers to effect dealings in securities to a corporation that is licensed by or registered with the SFC for Type 1 regulated activity, in the names of the persons from whom those offers are received; and (ii) introducing persons to a corporation that is licensed by or registered with the SFC for Type 1 regulated activity in order that they may effect dealings in securities or make offers to deal in securities.
- Details of the relevant regulatory requirements are set out in the Statement of Disciplinary Action.