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SFC revokes Axial Capital Management Limited’s licence and suspends its responsible officer for five years

Issue date: 2023-09-11 16:30:00

The Securities and Futures Commission (SFC) has revoked the licence of Axial Capital Management Limited (Axial) for repeated failures to comply with the Securities and Futures (Financial Resources) Rules (FRR), the Securities and Futures Ordinance (SFO) and the Code of Conduct (Notes 1 & 2).

The SFC has also suspended the licence of Axial’s responsible officer (RO), Mr Eugene Chung, for five years from 7 September 2023 to 6 September 2028 (Note 3).

The investigation of the SFC found that Axial failed to maintain its required liquid capital of $100,000 for a consecutive period of 19 months, from 28 March 2019 to 16 October 2020.  Despite becoming aware that its liquid capital had fallen below the required level shortly after the situation arose, Axial only notified the SFC 18 months later (Note 4).

In addition, the SFC found that Axial failed to submit within the prescribed periods its semi-annual FRR returns for June 2019, December 2019, June 2020, June 2021, June 2022 and December 2022, as well as the audited financial statements and other documents that a licensed corporation is required to submit under the SFO for the years ended 31 December 2019 and 31 December 2021 (Annual Documents), despite repeated reminders from the SFC to do so.

The SFC is of the view that Axial’s conduct was not only in breach of the SFO, the FRR and the Code of Conduct, but also amounted to flouting the FRR regime.  Under the circumstances, the conduct of Axial fell far short of the standards expected of licensed intermediaries.

The SFC considers that Axial’s failures were attributable to the failure of Chung in discharging his duty as the firm’s senior management and RO, including his failure to ensure the maintenance of appropriate standards of conduct and adherence to proper procedures by Axial, in breach of General Principle 9 of the Code of Conduct, which provides that the senior management of a licensed corporation should bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the firm.

In deciding the disciplinary sanction, the SFC has taken into account all relevant circumstances, including:

• Axial’s failure to maintain the required liquid capital and delay to notify the SFC of the failure were both prolonged;
• Axial repeatedly failed to submit its FRR returns and the Annual Documents on time;
• Axial’s flouting of the FRR regime threatens the integrity of the market because the regime provides significant statutory safeguards for investors, and enables the SFC to monitor the risks and liquidity level of licensed corporations;
• the cooperation of Axial and Chung in resolving the SFC’s concerns; and
• Axial and Chung have an otherwise clean disciplinary record with the SFC.

End

Notes:

1. Axial is licensed under the SFO to carry on Type 9 (asset management) regulated activity under the SFO.  Axial has not conducted any regulated activities since March 2020.
2. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
3. Chung has been accredited to Axial and approved to act as its responsible officer in respect of Type 9 regulated activity since June 2005.  Chung has been Axial’s Manager-In-Charge of all core functions since April 2018.
4. Axial’s required liquid capital deficit ranged from $26,490 to $114,459 between March 2019 and October 2020.

News captured as of:2023-09-11 16:30:00

Source: SFC