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Hong Kong SFC Fines CN Capital $127,000 for Breaching Trading Control Rules

Hong Kong’s Securities and Futures Commission (SFC) has reprimanded CN Capital Management (CN Capital) and fined the firm $127,000 (HKD 1 million) for breaching trading control rules.

” Hong Kong SFC Fines CN Capital $127,000 for Breaching Trading Control Rules “

From 2011 to 2016, none of CN Capital had disclosed their personal investment holdings in writing.  2 staff members, had made 3,188 personal trades without pre-clearance from the designated officer of CN Capital.  They had also held personal investments for less than 30 days in 619 trades, without pre-approval.  A possible conflict of interest had also arose when both staffs made 996 personal trades on a particular stock in a day, where trades were also made by a fund managed by CN Capital (346 trades were executed at a higher price than the fund while 459 trades were made at a lower than than the fund).

The 2 staffs, George Chan and Stephen Ng were fined $12,700 (HKD 100,00) respectively,   for failing to comply with the employee account dealing requirements under the Fund Manager Code of Conduct, breaching the basic principle that persons engaged in fund management business, when transacting for themselves, must give their clients priority and avoid conflicts of interest.

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CN Capital also failed to maintain an effective compliance function and satisfactory internal controls to ensure compliance with the personal account dealing requirements, receiving a fine of $127,000 (HKD 1 million) .  CN Capital has been licensed under the Securities and Futures Ordinance (SFO) to carry on Type 9 (asset management) regulated activity since 2010.

In deciding the sanctions, the SFC took into account CN Capital and the 2 staff members had self-reported the regulatory breaches and failures.  There was also no evidence of front-running activities nor impact of client from their personal trades.  All have no prior  disciplinary record and have taken remedial measures to rectify the breaches and strengthen CN Capital’s internal controls and systems.  

Source: SFC

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