Mr Lau Ki Fung , a former account executive of KGI Asia Limited, gets a fine over lack of proper client order management after receiving the client orders through face-to-face meetings or by mobile phone.
Mobile communication may be convenient but it may also result in a securities industry representative being penalized in Hong Kong. The Securities and Futures Commission (SFC) has reprimanded Mr Lau Ki Fung, a former account executive of KGI Asia Limited (KGI), and fined him $80,000 over his failure to keep proper records of order instructions from clients.
Lau was an account executive (AE) at KGI between January 31, 2013 and September 21, 2016. Information provided by KGI to the SFC showed that between July 29, 2015 and August 10, 2015, Lau executed 156 orders for derivative warrants received from the clients and he only prepared written records for nine of these orders. There were no written records for the remaining orders and Lau also did not call back to KGI’s telephone recording system to record the time of receipt and the details of the Orders in accordance with KGI’s internal requirements.
According to Lau, he received the orders through face-to-face meetings or by mobile phone. He admitted that he sometimes forgot to record orders on KGI’s telephone recording system when he was busy. Lau also admitted that he had not read in detail KGI’s Sales Manual which set out the order recording requirements and he had no recollection of KGI’s email reminders on the order recording requirements because he seldom went back to KGI’s office and checked his KGI email account.
The use of mobile phones for receiving client order instructions is strongly discouraged by Hong Kong regulators and firms.
The penalty was announced about a month after the SFC posted a circular to intermediaries, providing a guidance on the key controls and procedures which intermediaries are expected to put in place when using instant messaging applications to receive client orders. Among the requirements is the one concerning storage. The regulator requires that messages relating to client orders (order messages) and the IM accounts and devices for storing and processing them should be properly maintained and centrally managed to reduce the possibility of error and minimize the risk of record tampering. All order messages should be fully recorded and properly maintained for a period of not less than two years.
In order to provide security and reliability, the firms must make sure that the identities of clients who send order messages are properly authenticated and validated.
The SFC said it would take regulatory action against intermediaries which use IM applications to receive client orders without putting in place sufficient measures to ensure compliance with the regulatory requirements.
In January this year, the SFC reprimanded Mr Wu Hon Cheung, a former account executive of Sun Hung Kai Investment Services Limited, and fined him $50,000 over his failure to properly record order instructions received from a client through his mobile phone.