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Hong Kong SFC Suspends PICC Asset Management ex-Investment Manager Shum Wai Nap for 7 Months for Failure to Properly Manage Funds According to Stated Investment Strategy, Objectives & Restrictions, Only Invested in 1 to 3 Stocks During 21-Month Period, Failed to Manage Liquidity & Concentration Risks, PICC Asset Management Fined $358,000 in February 2024

21st June 2024 | Hong Kong

The Hong Kong Securities and Futures Commission (SFC) has suspended PICC Asset Management ex-investment manager Shum Wai Nap for 7 months for failure to properly manage funds according to stated investment strategy, objectives & restrictions, only investing in 1 to 3 stocks during a 21-month period, and failed to manage liquidity & concentration risks.  In 2024 February, Hong Kong SFC had fined PICC Asset Management $358,000 (HKD 2.8 million) for failure to ensure investments meet fund-stated investment strategy, failure in risk management & failure to supervise designated fund manager between 2018 to 2020.  Hong Kong SFC (20/6/24): “The Securities and Futures Commission (SFC) has suspended Mr Shum Wai Nap, former licensed representative of PICC Asset Management (Hong Kong) Company Limited (PICC), for seven months from 20 June 2024 to 19 January 2025 for fund management failures.  The SFC’s investigation found that while Shum was the investment manager on behalf of PICC for a Cayman-incorporated fund between May 2018 and April 2020, he failed to properly manage the fund to ensure that its investments were in line with its stated investment strategy, objectives and investment restrictions.  He also failed to properly manage the risks of the fund in accordance with PICC’s policies.  In particular, the SFC found that: 1) Contrary to the fund’s investment objective and strategy, there were only one to three stocks at any given point in time in the fund’s portfolio during a 21-month period from its inception in May 2018 to January 2020 (Note 3).  In addition, the fund held highly concentrated positions in two Hong Kong-listed stocks, one of which was not on the permitted securities list approved by PICC’s senior management.  But Shum did not take proactive steps to mitigate the risks associated with the fund’s holding of an unsuitable stock; 2) Shum failed to properly manage the liquidity and concentration risks of the fund in accordance with PICC’s policies, and he did not comply with PICC’s stop loss procedure.”   More info below:

“ Hong Kong SFC Suspends PICC Asset Management ex-Investment Manager Shum Wai Nap for 7 Months for Failure to Properly Manage Funds According to Stated Investment Strategy, Objectives & Restrictions, Only Invested in 1 to 3 Stocks During 21-Month Period, Failed to Manage Liquidity & Concentration Risks, PICC Asset Management Fined $358,000 in February 2024 “

 



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In deciding the disciplinary sanction against Shum, the SFC has taken into account all relevant circumstances, including:

  • the gravity of his failures to ensure the fund’s adherence to its investment mandate and to properly manage the risks of the fund could undermine the confidence of the investing public and market integrity;
  • a strong deterrent message to the market that such failures are not acceptable; and
  • his otherwise clean disciplinary record.

Notes

  1. Shum was licensed under the Securities and Futures Ordinance and was accredited to PICC from 11 September 2017 to 8 April 2020 to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities.  He is currently not accredited to any licensed corporation.
  2. Shum was designated by PICC to act as investment manager of the fund from 2 May 2018 to 8 April 2020.  The SFC reprimanded and fined PICC $2.8 million for its failures to discharge duties as the manager of the fund between May 2018 and May 2020.  Please refer to the SFC’s press release dated 5 February 2024.
  3. The fund’s investment objective was to achieve capital preservation combined with steady capital appreciation over a long term through primarily investing in a diversified portfolio of equity securities.

A copy of the Statement of Disciplinary Action is available on the SFC website

 

 

Hong Kong SFC Fines PICC Asset Management $358,000 for Failure to Ensure Investments Meet Fund-Stated Investment Strategy, Risk Management & Supervise Designated Fund Manager Between 2018 to 2020

7th February 2024 – The Hong Kong Securities and Futures Commission (SFC) has fined PICC Asset Management $358,000 (HKD 2.8 million) for failure to ensure investments meet fund-stated investment strategy, failure in risk management & failure to supervise designated fund manager between 2018 to 2020.  Hong Kong SFC: “The SFC’s investigation found that PICC failed to properly manage the fund to ensure that its investments were in line with its stated investment strategy, objectives and investment restrictions.  PICC also failed to implement adequate and effective internal controls for the fund’s risk management and to adequately supervise the staff designated as the fund’s investment manager.”  More info below:

 

 

Hong Kong SFC Fines PICC Asset Management $358,000 for Failure to Ensure Investments Meet Fund-Stated Investment Strategy, Risk Management & Supervise Designated Fund Manager Between 2018 to 2020

Hong Kong, Asia’s leading financial centre

5th February 2024 – The Securities and Futures Commission (SFC) has reprimanded and fined PICC Asset Management (Hong Kong) Company Limited (PICC) $2.8 million over its failures to discharge duties as the manager of a Cayman-incorporated fund between May 2018 and May 2020 (Note 1).

The SFC’s investigation found that PICC failed to properly manage the fund to ensure that its investments were in line with its stated investment strategy, objectives and investment restrictions.  PICC also failed to implement adequate and effective internal controls for the fund’s risk management and to adequately supervise the staff designated as the fund’s investment manager.

In particular, the SFC found that:

  • contrary to the fund’s investment objective and strategy, there were only one to three stocks at any given point in time in the fund’s portfolio during a 21-month period from its inception in May 2018 to January 2020 (Note 2).  In addition, the fund held highly concentrated positions in two Hong Kong-listed stocks, one of which was not on the permitted securities list approved by PICC’s senior management.
  • PICC did not have adequate internal controls in place to ensure the fund’s adherence to the investment mandate and to manage non-compliance in this respect.  It also lacked effective controls to manage the liquidity and concentration risks of the fund, and to ensure compliance with its stop loss procedure.
  • PICC placed significant reliance on the investment manager to manage the fund and the associated risks and failed to properly supervise his investment activities.

In deciding the disciplinary sanctions against PICC, the SFC has taken into account all relevant circumstances, including:

  • the gravity of PICC’s failures to ensure the fund’s adherence to its investment mandate and to properly manage the risks of the fund could undermine the confidence of the investing public and market integrity;
  • a strong deterrent message to the market that such failures are not acceptable;
  • PICC has taken steps to enhance its risk management and liquidity monitoring controls; and
  • PICC’s otherwise clean disciplinary record.

 

Notes:

  1. PICC is licensed to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance.
  2. The fund’s investment objective was to achieve capital preservation combined with steady capital appreciation over the long term through primarily investing in a diversified portfolio of equity securities.

A copy of the Statement of Disciplinary Action is available on the SFC website




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