SFC Revokes the Registration of Chan Hing Fung Katie for Misappropriation and Deception

21 Oct 2002



The SFC has revoked the registration of Ms Chan Hing Fung Katie, a securities dealer's representative, for misappropriation and deception.

Over a period of two and a half years, whilst employed by Hou Tak Securities Limited, Chan's dishonest acts had caused losses to her clients amounting to about $3 million.

Chan abused the trust her clients had placed in her by, for example, inducing her clients to pay settlement monies into her personal bank account, which she then misappropriated. Further, she also deceived her clients to buy into apparently very favourable, but fictitious, investment schemes allegedly involving blue chip shares.

Being a settlement clerk as well as an account executive, Chan covered up her activities with ease by forging account statements. Some of the clients also trusted Chan so much that they did not even require Hou Tak to send account statements to them.

Mr Alan Linning, SFC's Executive Director of Enforcement, said: "Chan stole from and deceived her clients. She is unfit to have access to client money and assets."

"Misappropriation and fraud strike at the heart of a broker's responsibilities to the clients. We will immediately revoke any registered person who steals client money or securities or deceives or defrauds clients. We or the Police will also consider whether criminal prosecution is possible on the evidence," he said.

The SFC understands that Police is looking into this case after receiving reports from Chan's clients.

Internal controls and investor vigilance

Mr Linning reminds all registered persons that they must have adequate internal control policies and ensure compliance with them. Intermediaries must ensure that they comply with applicable laws, rules and codes of conduct at all times.

Investors are advised to protect themselves by at least checking their trading documents and monthly statements, which their brokers are obliged to send to them on a timely basis. Any irregularities should be immediately followed up with the broker's management personnel, instead of the account executives themselves. The broker's management personnel should also be consulted on any suspiciously favourable investment scheme.

Mr Linning said: "Clients should also ensure that client agreements with their brokers are properly executed before transacting any trades. Last but not least, clients should not settle their trades by paying the account executives personally."

A catalogue of dishonest acts

The SFC's action stemmed from an inquiry into Chan's conduct as a securities dealer's representative in which the SFC found that between December 1999 and July 2002:

  • Unauthorized trading: Chan conducted unauthorized transactions in six client accounts, causing substantial losses to her clients;
  • Chan caused the proceeds from the unauthorized sales to be deposited to her personal bank account or to be used for settlement of other unauthorized trades by her;
  • Deceiving her clients: Chan failed to carry out her clients' instructions to purchase securities, but then told her clients that the trades had been executed; and she further induced them to make payment to her personal bank account to settle such unexecuted trades;
  • where the clients paid the settlement monies for such purported trades, which in fact had not been executed, directly to Hou Tak, Chan caused the payments to be credited to an account controlled by her;
  • Falsifying documents: Chan provided false information to the clients regarding the stock balances in their accounts, either orally or, if the clients requested for the transaction records, by preparing and sending falsified trading statements and contract notes to her clients to conceal the unauthorized transactions;
  • Deception scheme: Chan falsely represented to her clients as well as two other individuals, who had not opened trading accounts with Hou Tak, that Hou Tak offered to sell them blue chip securities with guaranteed returns provided that they refrained from selling the securities for a period of time. Chan did not use the payments made by the clients to purchase the securities, but instead converted them to her own use; and
  • Chan was responsible for both settlement and dealing functions, and was able to change the clients' correspondence address on Hou Tak's records; as a result, the clients did not receive the official trading statements issued by Hou Tak.

Chan's conduct involved a fundamental breach of trust, and made her completely unfit to remain registered. The SFC therefore revoked Chan's registration.




Page last updated 21 Oct 2002