ComplianceOne Newsletter – June 2025
The topics discussed in this monthly newsletter are as follows:
REGULATORY UPDATES
A tour of recent developments of the VA Regulatory Regime in Hong Kong
SFC joins global regulatory effort to curb activities of unauthorised finfluencers
SFC proposes to further restrict use of misleading names to enhance investor protection
MARKET NEWS
ENFORCEMENT NEWS
SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation
SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account
SFC bans LAW Man Wai for market manipulation
Regulatory Updates
1. A tour of recent developments of the VA Regulatory Regime in Hong Kong
Recent Developments
(1) Hong Kong Expands Crypto Market with Derivative Trading for Professional Investors
The SFC is ready to introduce virtual asset derivatives trading for professional investors as part of its efforts to increase product diversity and reinforce robust risk controls. The move is part of Hong Kong's drive to enhance its competitiveness in the global digital asset market.
With this in mind, the SFC will focus on robust risk management measures to ensure orderly, transparent, and secure trading. The proposed product is designed to facilitate efficient risk transfers, increase liquidity in spot markets where cryptocurrencies area traded instantly, and assist experienced investors in implementing their hedging and leveraging strategies.
The Financial Services and the Treasury Bureau is preparing a second policy statement on virtual assets, exploring how to harness traditional financial services and emerging technologies to drive growth in the VA market.
More encouraging, virtual assets will be classified as qualifying transactions under Hong Kong's preferential tax regimes to attract international fintech players.
On 26 June 2025, the HKSAR Government issued its long-awaited Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset (DA) field; built upon the foundational measures outlined in its initial policy statement in October 2022.
The Policy Statement 2.0 sets out a vision for a trusted and innovative DA ecosystem that prioritizes risk management and investor protection; the latest statement introduces the main theme of “LEAP” framework with focuses on:
Legal and regulatory streamlining: The government is establishing a comprehensive regulatory framework for DA service providers, including DA exchanges, stablecoins issuers, DA dealing service providers, and DA custodian service providers.
Expanding the suite of tokenised products: The government will regularize the issuance of tokenised Government bonds and incentivize the tokenisation of RWAs to enhance liquidity and accessibility.
Advancing use cases and cross-sectoral collaboration: The government is fostering collaboration among regulators, law enforcement agencies, and technology providers for the development of DA infrastructures.
People and partnership development: The government is strengthening talent development through partnerships with industry and academia, positioning Hong Kong as a centre of excellence for DA knowledge-sharing and international cooperation.
(3) Next move is to seek opinion from market practitioners. Starting with the first “Public Consultation on Legislative Proposal to Regulate Dealing in Virtual Assets” (a non-exhaustive extract)
(1) Scope and coverage: any person who conducted a business in providing services of spot trade of any VAs in Hong Kong will need to be licensed
(2) Business types and Business models:
a) simple dealing;
b) more complex dealing services;
c) all other VA dealing services.
(3) Exemptions:
a) stablecoin issuers who (i) are licensed by the HKMA and (ii) conduct offering or redemption of the stablecoins they issue in the primary market;
b) peer-to-peer trading of VAs between individuals where no intermediary is involved.
(4) Regulatory Requirements:
a) VA dealing service providers that fall within the scope will need to be licensed or registered;
b) The SFC will set out standards of the requirements.
(5) Regulatory Principle:
a) taking the “same activity, same risks, same regulation” principle, taking reference from the VATP licensing regime.
(6) Eligibility:
a) A HK company with two ROs with sufficient financial resources such as HKD5M as minimum paid-up capital or HKD3M as minimum required liquid capital;
b) A licensee or registrant will have to set up a token admission and review committee establishing, implementing and enforcing the criteria for any VA to be made available for/withdrawn from trading;
c) deposits/withdrawals of clients’ VAs to/from the licensees’ wallet addresses;
d) Investor Protection: assessing clients’ VA knowledge, risk profiling, position limits etc.
(7) Licensing Matters: no deeming arrangement to the pre-existing VA dealing service providers.
(8) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions.
(9) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory parity among different regimes relating to VA activities
(10) Public Consultation.
(4) Then come with the next round for “Public Consultation on Legislative Proposal to Regulate Virtual Asset Custodian Services” (a non-exhaustive extract)
(1) Definition: the provision of VA custodian service as a business is proposed to be defined as:
by way of business, the safekeeping of (i) VAs on behalf of clients; or (ii) instruments enabling transfer of VAs of clients (including but not limited to private keys) on behalf of clients.
(2) Incidental Exemption for SFC or HKMA regulated entities where the safekeeping of client VAs is wholly incidental to the principal business of providing the VA service.
(3) Examples of VA Custodian like associated entities of SFC-licensed VATPs or banks, licensed or registered fund managers etc.
(4) Eligibility: a regime similar to Type 13 regulated activity.
(5) Licensing Issues: no deeming arrangement to the pre-existing VA Custodian.
(6) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions.
(7) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory
parity among different regimes relating to VA activities.
(8) Public Consultation.
Active participations from market participants
(5) GF Securities (Hong Kong) issued its first tokenised securities-
HashKey Chain announced that GF Securities (Hong Kong) Brokerage Limited (“GFS”) as the first brokerage firm to issue tokenized securities in Hong Kong, has now fully integrated with HashKey Chain as the core on-chain issuance network, and has launched the first daily redeemable tokenized security ,"GF Token". High-net-worth individual professional investors and institutional professional investors can participate in subscription and trading.
"GF Token" is a tokenized security issued by GFS based on its credit rating support where the issuance to investors includes three currencies: USD, HKD, and CNH. Among them, the yield of the US dollar tokenized securities is anchored to the Secured Overnight Financing Rate (“SOFR”), providing users with a fair, transparent, and low-volatility cash management tool denominated in USD.
HashKey Group Chairman Xiao Feng stated that the on-chain integration of Real-World Assets (RWA) requires genuine two-way integration between financial institutions and blockchain technology platforms, and the release of the "GF Token" materialized this concept.
2. SFC joins global regulatory effort to curb activities of unauthorised finfluencers
The SFC is joining regulators across the globe to curb activities of unlawful financial influencers (“finfluencers”) who are putting millions of social media users at risk by touting financial products or services illegally. To achieve this aim, the SFC and the other members of the International Organization of Securities Commissions (“IOSCO”) are participating in the “Global Week of Action Against Unlawful Finfluencers” during the week of 2 June 2025.
This initiative involves regulators using a combination of supervisory and enforcement powers to disrupt illegal activities of finfluencers, coupled with educational schemes and consumer awareness programmes.
Some key takeaways are:
A) SFC’s supervisory actions
assess securities brokers’ compliance with applicable regulatory requirements when engaging finfluencers and digital platforms;
review selected securities brokers’ due diligence of the finfluencers and digital platforms to ensure that these media are not involved in any unlicensed activities or improper practices;
issue guidance to licensed corporations outlining expected standards when engaging finfluencers and digital platforms.
B) SFC’s enforcement actions
suspend the licence of a finfluencer who was criminally convicted for providing investment advice via a chat group beyond the scope of his licence;
commence criminal prosecution against a finfluencer for unlicensed regulated activities;
take a pro-active role to press the overseas VATP to terminate affiliate arrangements with finfluencers thus preventing them from marketing to local public;
engage with social media platforms to remove social media posts and profiles impersonating public figures and promoting unauthorised investment products.
C) Investor education
warn the public about scammers impersonating or posing as finfluencers on social media through its Alert List system;
encourage the public to utilise IOSCO’s newly revamped global warning system, the International Securities & Commodities Alerts Network (“I-SCAN’);
make use of its ongoing “Don't be Sucker” anti-scam publicity campaign to arouse awareness of the public against finfluencers-related pitfalls and other common investment scam tactics.
SIGNIFICANCE:
As Julia Leung, the SFC’s Chief Executive Officer, said: “As part of our education efforts, we must emphasise the importance of personal responsibility. Investors should serve as their own first line of defence by verifying the regulatory status and trustworthiness of the finfluencers, critically evaluating any investment ideas from them, and conducting thorough due diligence on any prospective investments before committing”.
3. Rumour of mainland’s crackdown on illegal cross-border accounts opening: more Hong Kong brokers tighten onboarding rules
Media reports in China indicate that regulatory efforts to curb mainland residents’ unauthorized use of Hong Kong accounts for cross-border investments are intensifying. Following the responses by Futu Securities International (Hong Kong) Limited and Tiger Brokers (HK) Global Limited, many Hong Kong-based securities firms—including Long Bridge HK Limited and Valuable Capital Limited—are tightening the account-opening requirements for clients originated from mainland since June.
Media indicated that some brokers have already done away with the previously accepted method of using "proofs of existing accounts" (存量證明, “PEA”) for onboarding. Instead, mainland clients must now provide proof of cross-border residence or employment, such as utility bills or rental agreements. This explicitly strangles the flexibility that allowed mainland investors to indirectly open securities accounts in Hong Kong through loopholes.
The PEA methodology had permitted mainland investors to open Hong Kong or U.S. securities accounts by verifying ownership of another already existing overseas securities account. With its removal replaced with the new “proof of life & work”, the requirement substantially raises barriers for mainland residents seeking to open new trading accounts in Hong Kong, explicitly cutting off any channels for those investors permanently residing in mainland China.
The report quoted a number of Hong Kong brokerages as saying that the closure of mainland residents' account opening was carried out under the guidance of mainland regulators, and the relevant requirements were effected about three days ago, when several brokerages received a unified regulatory order restricting mainland residents from opening accounts in Hong Kong.
4. The Government welcomed the passage of the Banking (Amendment) Bill 2025 to share information of suspicious accounts
Passage of the Banking (“Amendment”) Bill 2025 by the Legislative Council on 4 June helps facilitate the sharing of account information among banks under specified conditions to enhance the efficiency in detecting and preventing crime in Hong Kong.
With the Amendment Ordinance:-
a voluntary mechanism is in place for banks and relevant law enforcement agencies to share with each other, via electronic means, information of corporate and individual accounts through secure platforms designated by the Hong Kong Monetary Authority (“HKMA”), when banks become aware of suspected prohibited conduct (i.e. money laundering, terrorist financing or financing of proliferation of weapons of mass destruction);
legal protection provided for banks that disclose the relevant information;
banks and relevant law enforcement agencies are enabled to act swiftly to intercept illicit funds and expedite intelligence gathering, thus providing better protection to the public.
SIGNIFICANCE:
As the Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "The new mechanism not only enhances Hong Kong's ability to combat fraud and associated money laundering activities, providing better protection for citizens, but also helps maintain the stability of Hong Kong's banking system and showcases the efforts made by Hong Kong, as an international financial centre, in international collaborations to combat relevant illegal activities."
And the Chief Executive of the HKMA, Mr Eddie Yue, said, "The new information sharing mechanism will further enhance the ability of the banks to detect and prevent fraud and other financial crime. The HKMA will continue to work closely with the Hong Kong Police Force and the banking sector to take forward the preparation work, including the upgrade of systems and formulation of practical guidelines, with a view to implementing the new mechanism as soon as practicable."
5. SFC proposes to further restrict use of misleading names to enhance investor protection
On 12 June 2025, the SFC launched a consultation aimed at restricting unregulated entities from improperly adopting names that may give the public a false impression that they are regulated entities.
Some key points of the proposal:
to cater for recent developments, including the emergence of virtual asset trading platforms (VATPs), the SFC proposes expanding the current list of restricted titles under the Securities and Futures Ordinance (SFO) which currently sets out a list of names that cannot be adopted except with the SFC's approval (e.g. "stock exchange" and "commodity exchange"); the aim of it is to ensure that businesses and operations do not adopt names that may mislead the public into believing they are regulated by the SFC when in fact they are not;
to include similar restrictions under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The rationale is that VATPs that carry on business in Hong Kong, or actively market their services to Hong Kong investors, are required to be licensed and regulated by the SFC. The SFO regulates VATPs providing services for virtual assets that also constitute securities or futures contracts, while the AMLO regulates VATPs offering services for virtual assets that do NOT constitute securities or futures contracts;
extend the restrictions to commonly used terms that are similar in meaning to “exchange” (e.g. “trading platform”) and those that refer to some of the financial products and platforms regulated under the SFO; some titles that may imply an association with established exchanges, VATPs and other similar entities are also covered under the restriction.
SIGNIFICANCE:
The proposed restriction is conducive in stifling the use of misleading name in the disguise of any publicly known entity for deceiving the public and conveying any fraudulent message of its legitimacy.
Market News
6. SFC released the 2024-25 Annual Report
Hong Kong's capital markets are experiencing a renaissance, driven by cutting-edge innovation and strengthened global ties. The SFC Annual Report 2024-25, released on 25 June 2025, paints a picture of a vibrant financial hub that's embracing the future while solidifying its position as a global leader.
Innovation at the Forefront
Hong Kong is rapidly evolving into a future-ready financial hub, leading the charge in virtual assets and securities tokenization. Virtual assets, such as cryptocurrencies, and tokenized securities are making markets more efficient and accessible.
Last quarter (Q1 2025), it authorized the Asia-Pacific’s first batch of three tokenized money market funds for retail access[1], with total assets under management reaching HKD$736 million by March 2025.
Under the SFC’s "ASPIRe" roadmap:
Two virtual asset ETFs were permitted to engage in staking (earning rewards by holding certain cryptocurrencies), making them the first-of- their-kind in the Asia-Pacific region.
The six Hong Kong-listed virtual asset spot ETFs have also seen their total market capitalization surge 95% since April 2024, with daily turnover rising 16%.
Additionally, the SFC has licensed 11 virtual asset trading platforms, cementing Hong Kong’s role as a digital finance hub.
Strengthening Global Connectivity
Hong Kong’s global ties have deepened, particularly with Mainland China and the Middle East. The Stock Connect scheme has been a standout success, with cumulative southbound inflows exceeding $4.35 trillion by May 2025, and southbound trading now accounting for 22.5% of Hong Kong’s market turnover.
New partnerships with the Middle East are thriving. Two Hong Kong ETFs cross-listed on the Saudi Exchange have become the largest there, boasting a market capitalization of $14.5 billion (US$1.86 billion) as of May 2025. Asia’s first Saudi ETF, listed in Hong Kong since late 2023, has seen its feeder ETFs on Mainland exchanges contribute 17% to its market cap since mid-2024. These milestones highlight Hong Kong’s growing role as Asia’s premier capital intermediary.
Other Noteworthy Highlights
Enforcement & Protection: The SFC secured landmark rulings, including the longest prison sentences for market manipulation and a historic settlement for Combest Holdings Limited shareholders, reinforcing market integrity.
Anti-Scam Efforts: The “Don’t Be Sucker” campaign expanded via MTR commercials and TV, garnering over 1.6 million views to protect investors.
Sustainability: The SFC halved its carbon emissions from the baseline, hitting its interim target five years early, showcasing its green commitment.[2]
SIGNIFICANCE:
The SFC’s leadership has been instrumental. Chairman Dr. Kelvin Wong emphasized, “Our role as an effective regulator is to ensure Hong Kong remains a cornerstone of global finance, where capital flows efficiently, innovation thrives, and fairness builds trust.” CEO Ms. Julia Leung added, “Hong Kong’s long-term success hinges on strengthening our core competence as a premier fund-raising and asset management hub and capitalizing on transformative global forces.”
The numbers speak for themselves. Since April 2024, 64 Mainland enterprises have listed in Hong Kong, raising over $100 billion through IPOs. The total market capitalization of ETFs and leveraged and inverse products hit a record $520 billion, up 35% year-on-year, comprising 15% of market turnover. The SFC, collaborating with HKEX, has also slashed the average response time for new listing applications to 20 business days, boosting efficiency.
[1] These include the introduction of tokenised classes to existing SFC-authorised money market funds. The AUM represents that of their tokenised classes.
[2] SFC announces carbon neutrality commitment: SFC has set the interim goal of halving its carbon emissions by 2030 and ultimate goal of achieving carbon neutrality by 2050.
Enforcement News
7. SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation
On 6 June 2025, the SFC took decisive action against GA (Int'l) Capital Management Limited (“GCML”) due to concerns about its reliability, integrity, and ability to carry out its regulated activities (i.e. RA 4 & 9[1]) competently, honestly, and fairly. This has led the SFC to question GCML's fitness and properness to remain a licensed entity.
The SFC issued a restriction notice to GCML, imposing the following prohibitions:
GCML cannot carry on any of its licensed regulated activities without prior written consent from the SFC.
GCML is barred from disposing of or dealing with any relevant property, except for paying operational expenses in the ordinary course of business. Such actions require prior written notification to the SFC and their consent.
SIGNIFICANCE:
In addition to the restriction notice, the SFC conducted a search operation on June 6, 2025, which included searching the premises occupied by GCML’s responsible officer. This step underscores the seriousness of the ongoing investigation. These measures are designed to protect the investing public and maintain market integrity, reflecting the SFC's assessment of the situation's severity.
The SFC has emphasized that the investigation remains active, and no further comments will be provided at this stage.
[1] RA4: Type 4 Advising on securities; RA9: Type 9 Asset management
8. SFC suspends Pun Hong Hai for supervisory failures
The SFC has suspended Mr. PUN Hong Hai (“PUN”), a former responsible officer and chief executive officer of Freeman Commodities Limited, for 10 months, from 11 June 2025, to 10 April 2026. This disciplinary action stems from supervisory failures identified during an investigation into his oversight of the company’s operations between June 2017 and December 2018.
Key Findings
PUN failed to ensure Freeman Commodities Limited upheld appropriate standards of conduct and adhered to proper procedures during his tenure:
PUN inadequately managed risks tied to the company’s use of customer supplied systems (CSSs) for client order placements.
PUN did not sufficiently oversee suspicious money movements and trading patterns in client accounts over the specified period.
SIGNIFICANCE:
The SFC’s suspension of PUN reinforces its firm stance on accountability among senior management in licensed corporations. By imposing this 10-month penalty, the regulator sends a clear message about the necessity of diligent supervision and robust risk management practices.
9. SFC bans WONG Lai Suen for failure in managing credit risks and detecting suspicious trading activities
The SFC has imposed a six-month industry ban on Ms. WONG Lai Suen (“WONG”), former responsible officer (“RO”) and executive director of MTF Securities Limited (“MTF”), effective from 4 June to 3 December 2025. This disciplinary action stems from significant lapses in managing credit risks and detecting suspicious trading activities at MTF.
Case Overview & Key Findings
MTF’s clients executed transactions vastly disproportionate to their financial profiles, displaying red flags suggestive of market misconduct and money laundering, with one client’s limit even reaching ten times his declared annual income. MTF failed to flag these activities as suspicious, investigate further, or report them promptly to the Joint Financial Intelligence Unit and the SFC.
The SFC concluded that MTF lacked robust policies for credit risk management and monitoring suspicious trading, breaching the Code of Conduct and other regulatory standards. These shortcomings were pinned on WONG, who, as a RO and senior manager, failed to uphold her duties.
SIGNIFICANCE:
Christopher Wilson, SFC’s Executive Director of Enforcement, underscored the importance of accountability: "Senior management of a licensed corporation must not blindly follow marching orders from the firm’s shareholders or controllers. When faced with an unusual or suspicious request, the ROs should exercise independent judgment and, where appropriate, conduct proper due diligence before acting on the request."
He also added: "It is the duty of ROs and senior management to ensure that effective policies and controls are in place to prevent the firm from being used to facilitate wrongdoing, including market misconduct and money laundering."
10. SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account
The SFC has suspended Ms. Hadiee CHUI Lai Chun (“CHUI”), a licensed representative of Rifa Securities Limited (“Rifa”), for seven months from 13 June 2025, to 12 January 2026. This disciplinary action follows an SFC investigation into her conduct between September 2018 and September 2021.
Case Overview & Key Findings
During this period, CHUI maintained a personal securities trading account at another brokerage firm without disclosing it to Rifa, her employer. CHUI conducted 20 personal trades through this undisclosed account without obtaining prior approval from any responsible officer of Rifa. Furthermore, CHUI failed to report these trades or provide the relevant trade confirmations and statements of account to Rifa.
The SFC considers CHUI’s actions wilful and dishonest, raising serious concerns about her fitness and properness to remain a licensed person. By failing to disclose her trading account and conducting unauthorized trades, she undermined Rifa’s ability to oversee her activities, potentially jeopardizing the firm and its clients.
SIGNIFICANCE:
In imposing the seven-month suspension, the SFC took into account:
The duration of her breaches, spanning approximately three years.
Her cooperation in resolving the SFC’s concerns.
Her otherwise clean disciplinary record.
This sanction balances the severity of her misconduct with these mitigating factors.
This case highlights the critical need for transparency and compliance with regulatory and company policies among licensed persons. Failing to disclose personal trading activities can lead to significant consequences, including suspension or loss of licensure. Licensed individuals must uphold their obligations to safeguard the integrity of the financial markets and maintain public trust.
11. SFC reaches first settlement of its kind to compensate public shareholders of Combest Holdings Limited
On 2 June 2025, the SFC has obtained a groundbreaking court decision in the Court of First Instance, ordering former senior executives of Combest Holdings Limited (“Combest”) (HKEX: 08190) to pay $192 million in compensation to shareholders.
This ruling also includes disqualification orders against a shadow director[1] and two former executive directors for their misconduct, please refer to:
SFC’s press release dated 21 May 2020.
SFC’s press release dated 16 September 2024.
Case Overview
The SFC’s investigation revealed that between 2016 and 2019, the shadow director - Mr. NG Kwok Fai (“NG”) and two former executive directors - Mr. LIU Tin Lap and Mr. LEE Man To in serious financial misconduct, including:
Overvaluing two subsidiary group acquisitions by $229 million.
Paying $64 million in fictitious loan interests and fees to entities linked to NG.
Artificially inflating Combest’s revenue through transactions with NG-related entities.
These actions misled shareholders and misrepresented the company’s financial position, ultimately harming independent public shareholders of the now-delisted company.
[1] Shadow Director: someone who isn't officially appointed as a director of a company but exerts significant influence over its decisions, effectively acting as a director without the formal title.
Court Orders
The Court of First Instance delivered the following rulings:
Name | Roles | Disqualifications | Court Orders |
Mr. NG Kwok Fai | Shadow Director | Disqualified for 12 years, reflecting the severity of his misconduct. | Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders.
Legal Cost The former executives were ordered to cover the SFC’s legal costs. |
Mr. LIU Tin Lap | Executive Director | Each disqualified for 8 years for knowingly assisting Ng. | Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders.
Legal Cost The former executives were ordered to cover the SFC’s legal costs. |
Mr. LEE Man To | Executive Director | Each disqualified for 8 years for knowingly assisting Ng. | Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders.
Legal Cost The former executives were ordered to cover the SFC’s legal costs. |
The disqualification periods bar them from serving as directors, liquidators, receivers, or managers, or being involved in the management of any corporation.
Compensation Scheme Details (First-of-its-kind settlement in Hong Kong)
In an innovative settlement, the $192 million compensation will be administered by Bruno Arboit of Kroll (HK) Limited, jointly appointed by the SFC and Combest.
Enhanced Payouts: Two major shareholders (holding 24.4% of Combest) forfeited their entitlements, boosting independent shareholders’ dividends by 32.3%.
Per-Share Amount: Eligible shareholders will receive $0.066 per share—2.75 times higher than Combest’s last closing price before its suspension on 29 May 2019.
Distribution Process: Payments will be based on shareholdings as of the date the funds are deposited into the administrator’s account.
The administrator will contact eligible shareholders directly. For inquiries, reach out to:
Hotline: (852) 2281 0108
SIGNIFICANCE:
SFC Chief Executive Officer Ms. Julia Leung highlighted the ruling’s significance: “This court decision underscores the SFC’s power to hold de facto controllers of listed companies accountable for their misconducts, ensuring they face repercussions for their wrongdoings. The provision of direct compensation to affected shareholders marks a pioneering step, demonstrating the SFC’s unwavering devotion to exploring all avenues to achieve the most fair and efficient resolutions to protect the investing public.”
This case sets a powerful precedent, reinforcing accountability for corporate misconduct and introducing a direct compensation model that prioritizes affected investors.
Case Reference: HCCW 118/2020
12. SFC bans LAW Man Wai for market manipulation
The SFC has banned Mr. LAW Man Wai (“LAW”), a former licensed representative of Cinda International Securities Limited (“CISL”), from re-entering the industry for three years, from 19 June 2025, to 18 June 2028. This action stems from an SFC investigation into his activities between March and September 2023.
Background
LAW, who was licensed to conduct RA 1 (dealing in securities) from 26 March 2020, to 8 June 2024, used accounts belonging to his sister and a friend for personal trading. These accounts were held at CISL and another brokerage. During the specified period, he executed 109 matched trades[1] or wash trades[2] across nine stocks, involving his own CISL account and those of his sister and friend. His goal was to avoid forced liquidation due to potential margin calls, disregarding the trades' impact on stock prices or trading volumes.
Key Findings
LAW deliberately hid his beneficial interests and personal trades in these accounts, breaching CISL’s staff dealing policy.
LAW used CISL’s recorded telephone line to confirm trades with his sister and friend, submitting signed order records that falsely suggested the orders came from them.
Additionally, LAW impersonated his friend to place orders for the friend’s account at another brokerage, keeping his involvement hidden from that firm.
The SFC determined that LAW’s actions were dishonest, casting significant doubt on his fitness and properness to remain a licensed individual. However, the SFC noted a lack of evidence showing manipulative intent behind the trades and considered his previously clean disciplinary record when determining the three-year ban.
SIGNIFICANCE:
This case highlights the critical need for licensed representatives to follow regulatory and internal policies on personal trading and account usage. Unauthorized trading and concealment of interests can result in severe penalties, such as extended industry bans. Transparency and integrity are essential for maintaining trust in the financial markets.
[1] Matched Trade: A trade where a person sells securities at a price nearly identical to their (or an associate’s) buy offer, creating an artificial market appearance.
[2] Wash Trade: A trade with no change in beneficial ownership, effectively a self-transaction.
[End of ComplianceOne Newsletter – June 2025]
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