Hong Kong’s regulator, the Securities and Futures Commission (SFC) has reprimanded and fined $4 million the subsidiary of Yuanta Financial Holdings Co Ltd (TPE:2885) – Yuanta Securities (Hong Kong) Company Limited.
The penalty is imposed for failure to disclose the actual execution price and disclose the financial gains it made while handling bond transactions for its clients.
The SFC investigation found that between July and December 2012 Yuanta Securities earned $3.1 million in commission by manipulating the execution prices in some of the 256 transactions it made for 96 clients, but did not fairly and accurately disclose the fact to them. According to the findings, the Yuanta Securities’ financial team would buy the product, mark-up the price and pass it on to the sales team, which would mark it further up, before selling it to the client. The same method was used in executing sell orders by marking down the prices.
While some of Yuanta’s clients were aware of the commission the sales team earned, others were not. Besides, the clients were charged additional fees without their knowledge and consent and were not informed of the mark-up/mark-down actions.
Hong Kong’s SFC also concluded that Yuanta Securities failed to avoid and disclose conflicts of interest and act in its clients’ best interest. Furthermore, it did not inform them accurately of the actual execution prices and fees it was charging on transactions and did not include information on the prices, commission and charges in the daily statements.
Yuanta Securities (Hong Kong) Company Limited is licensed by the SFC to deal in securities, futures and forex and to advise on securities, futures, corporate finance and asset management.