SFC fines KTF Capital Management Ltd HK$400k for breaching Financial Resources Rules

The SDA reveals that the firm bought shares in the IPO of Fosun Tourism (1992), triggering breaches of the rather complicated FRR for 5 days in Dec-2018, and then tried to cover it up with a backdated assignment to a 3rd party, failing to report it to the SFC until the auditors detected it 4 months later. The proposed fine was halved from $800k "having considered KTCFM's financial position".

Further information

Statement of Disciplinary Action

SFC reprimands and fines KTF Capital Management Limited $400,000 for breaching Financial Resources Rules

Issue date: 2022-07-28 16:10:35

The Securities and Futures Commission (SFC) has reprimanded and fined KTF Capital Management Limited (KTFCM) (formerly known as Forchn International Asset Management Co. Limited and Rega Technologies Limited) $400,000 for failures to comply with the Securities and Futures (Financial Resources) Rules (FRR) (Notes 1 and 2).

The SFC found that KTFCM failed to maintain its required liquid capital of approximately $2.8 million between 13 and 18 December 2018 and notify the SFC when it became aware of its inability to comply with the financial resources requirements.  It transpired that the almost $20 million deficit in KTFCM’s liquid capital was the result of an oversight in that it failed to anticipate its proprietary trading in shares would trigger adverse implications to its liquid capital calculation under the FRR (Notes 3 and 4).

The SFC is of the view that KTFCM’s conduct was in breach of the Code of Conduct (Note 4).

In deciding the sanction, the SFC took into account all relevant circumstances, including:



  1. KTFCM is licensed under the Securities and Futures Ordinance to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities.
  2. The SFC originally proposed to fine KTFCM $800,000.  Having considered KTFCM’s financial position, the SFC decided to reduce the fine to $400,000.
  3. Pursuant to rule 27(1)(a) of the FRR (Proprietary positions of licensed corporations), a licensed corporation must include in its liquid assets listed shares that it beneficially owns at market value, less the haircut amounts in relation to the securities concerned. 
  4. Pursuant to rule 44(1)(a) and (g) of the FRR (Concentrated proprietary positions), where a licensed corporation holds for its own account listed shares and the net market value of any such securities which are of the same description equals 25% or more of its required liquid capital, it must include in its ranking liabilities, where the net market value is 51% or more of its required liquid capital, 10% of such net market value. 
  5. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
News captured as of:2022-07-28 16:10:35

Source: SFC


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