SFC reprimands and fines GMO-Z.com Forex HK Limited $1.6 million

The Securities and Futures Commission (SFC) has reprimanded and fined GMO-Z.com Forex HK Limited (GMOHK) $1.6 million for deficiencies in its order execution and slippage handling procedures, and failures in its electronic trading system for leveraged foreign exchange contracts (Note 1).

In August 2016, the SFC and GMOHK jointly engaged an independent reviewer to review GMOHK’s controls, which found that:

• GMOHK’s order execution and slippage handling procedures and the relevant policies were inadequate, and resulted in 243 transactions of 17 clients involving more than $270,000 being executed at the last tradable price instead of the next available price;
• GMOHK failed to adequately disclose to its clients its policy that the clients’ order execution would not be confirmed until GMOHK had hedged its risk exposure; and
• GMOHK’s electronic trading system for execution of client orders in leveraged foreign exchange contracts did not operate as intended and could affect the execution price and the execution time in certain circumstances.

The SFC considers that GMOHK’s failures fell short of the standards as set out in the Code of Conduct (Note 2).

In determining the sanction, the SFC considers that GMOHK’s cooperation has significantly expedited the investigation and disciplinary proceedings. Similar failures would have resulted in a substantially higher level of fine. 

End

Notes:

1. GMOHK is licensed under the Securities and Futures Ordinance to carry on business in Type 3 (leveraged foreign exchange trading) regulated activity.
2. Among others, General Principles 2 (diligence) and 6 (conflicts of interest) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission provide that a licensed corporation, in conducting business activities, should act with due skill, care and diligence, and in the best interests of its clients and try to avoid conflicts of interest, and when the conflicts cannot be avoided, should ensure the clients are fairly treated.