SFC fines firm for failing to identify client

Added 31st May 2016

Hong Kong's Securities and Futures Commission has reprimanded and fined Guotai Junan Securities (Hong Kong) for failing to reveal a client's identity.

SFC fines firm for failing to identify client

Guotai Junan was fined HK$1.3m ($167,338).

The firm is a unit of Shanghai-based Guotai Junan Securities, which is also the parent company of Shanghai Guotai Junan Securities Asset Management and Guotai Junan Allianz Fund Management. 

The case goes back to July 2014, when the SFC requested that Guotai Junan Securities (Hong Kong) provide details of the ultimate clients of certain transactions it carried out for an intermediary client in Korea.

The firm was unable to provide the requested information in accordance with the client identity rule policy.

The intermediary client then informed the SFC and the firm on 1 August 2014 that under Korean law it could not provide the information without written consent from the ultimate client.

The firm did not provide the requested information to the SFC until January 2015.

Between August 2014 and January 2015, the firm then continued to carry out over 8,000 transactions for the intermediary client, despite having been reminded by the SFC of its obligation to refuse the business of those who are not prepared to provide ultimate client information to the regulators.

The SFC decided to take disciplinary action against the firm because the failure to identify the client could jeopardise the integrity of the market, as it might hinder the SFC from ascertaining the identities of those who are responsible for securities transactions, the regulator said.

Guotai Junan "has agreed to conduct an independent review of its systems and controls in respect of its compliance with the regulatory requirements on ascertaining client identity", the SFC added.

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