SFC suspends Francis Lun Sheung Nim for 7.2 months
Lun "failed to appreciate and discharge his responsibilities as an RO and senior management of a licensed corporation".
SFC suspends Lun Sheung Nim for 7.2 months
Issue date: 2021-06-10 17:02:14
The Securities and Futures Commission (SFC) has suspended the licence of Mr Lun Sheung Nim, a responsible officer (RO) of GEO Securities Limited (GEO), for 7.2 months from 10 June 2021 to 16 January 2022 (Note 1).
The disciplinary action follows the SFC’s sanctions against GEO for breaches of its licensing conditions and failures related to its sale of unlisted bonds between 1 July 2014 and 16 November 2015 (Note 2).
The SFC found that GEO’s breaches and failures during the material period were attributable to Lun’s failure to discharge his duties as an RO and a member of GEO’s senior management (Note 3).
By allowing GEO to provide discretionary account management services to clients and introduce clients directly to listed companies to subscribe for their unlisted bonds during the material period, Lun directly contributed to GEO’s breach of the conditions on its licence. Lun also showed a fundamental failure to understand and properly manage the risks associated with GEO’s business.
In particular, Lun failed to:
- ensure that GEO conducted adequate due diligence on the unlisted bonds before their recommendations to clients;
- establish an effective system at GEO to assess clients’ risk tolerance and ensure the recommendations and/or solicitations made to clients in relation to the unlisted bonds were suitable and reasonable for the clients;
- implement policies and procedures at GEO to ensure documentary records of investment advice or recommendations made to clients were maintained and a copy of the written advice was given to clients; and
- ensure GEO disclosed the commission it received from issuers for the successful placement of the unlisted bonds to clients.
The SFC considers Lun’s conduct fell short of the standard required of him as an RO for a licensed corporation.
In deciding the disciplinary sanction, the SFC took into account all relevant circumstances, including the seriousness of GEO’s regulatory breaches and Lun’s cooperation and willingness to resolve the SFC’s concerns.
- Lun has been licensed under the Securities and Futures Ordinance since 30 November 2004. Lun has been accredited to GEO to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities since 23 July 2013, and has been approved as its RO for Type 1 (dealing in securities) regulated activity since 23 July 2013, Type 4 (advising on securities) regulated activity since 7 May 2014, and Type 9 (asset management) regulated activity since 21 March 2018.
- GEO was reprimanded and fined $6.3 million by the SFC. Please see the SFC’s press release dated 23 March 2021.
- General Principle 2 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) requires a licensed person to act with due skill, care and diligence, in the best interests of its clients and the integrity of the market. General Principle 9 of the Code of Conduct requires the senior management of a licensed corporation to bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the firm. Paragraph 14.1 of the Code of Conduct further provides that the senior management of a licensed corporation should properly manage the risks associated with the firm’s business.