SFC Suspends Tsang Wa Wai William and Reprimands Masterlink Securities and {X} for Breaching the Code of Conduct and Improper Debt Collection

The SFC has suspended the registration of Mr Tsang Wa Wai William for four months and reprimanded Masterlink Securities (Hong Kong) Corporation Limited and its dealing director {X}.   

Tsang

The action follows an inquiry into a complaint made to the SFC by clients of Masterlink about unauthorized trading in their accounts.  After investigating, the SFC found that from 1 July 2000 to 31 August 2000, Tsang, a dealer’s representative of Masterlink, had accepted orders from another employee of Masterlink for the accounts of two clients without their authority.  The employee’s unauthorized trading was substantial and created losses of over $400,000 in the clients’ accounts.   

The SFC found that Tsang’s accommodating the employee’s unauthorised trading was improper and exposed the relevant parties to unnecessary risks.  Further, his failure to monitor the trading in the two clients’ accounts and his failure to ensure that the employee had the necessary authority to operate these two accounts breached the Code of Conduct. 

Masterlink 

At the time of Tsang’s misconduct, Masterlink had insufficient credit and trading limits controls in place.  The SFC also found that Masterlink’s action in pursuing debt recovery against one of the clients was inappropriate and amounted to conduct unbefitting of a registered person.  By then, Masterlink knew that the trading had been conducted without the knowledge and consent of the client.  During the inquiry, the SFC also found inadequacies in the way in which Masterlink handled client funds so that clients were inadequately protected from financial losses.  At the SFC’s request, Masterlink appointed accountants to review its systems and controls. 

{X}

Between 1 July 2000 and 31 August 2000, {X} was the sole dealing director who was responsible for Masterlink’s day-to-day operations.  The SFC found that {X} bore responsibility for the failings identified in Masterlink’s internal controls and procedures and that he had failed to properly supervise his staff.      

Based on these findings, the SFC concluded that Tsang, Masterlink and {X} were guilty of misconduct and their fitness and properness had been called into question.  The SFC therefore decided to suspend Tsang’s registration for four months and reprimand Masterlink and {X}. 

In determining the level of penalty, the SFC noted that Masterlink had been co-operative during the SFC investigation and had taken measures to improve its systems and internal controls.   

Mr Alan Linning, SFC’s Executive Director of Enforcement, said: “A registered person must establish and maintain effective policies, operational procedures and controls in relation to its day-to-day business operations. In particular, prior to executing a client order, a designated staff member must check the sufficiency of available funds or securities in the relevant account, its margin position (including any applicable limitations) and the authority of the person placing the order.  A registered person must also justify its action to be taken against its clients for collection of debt.  It is not acceptable to hold clients responsible for losses caused by a staff member’s misconduct. We will treat any breaches of these requirements seriously.” 

Masterlink is a registered dealer under the Securities Ordinance. 

Ends