ComplianceOne Newsletter – May 2022
ComplianceOne Newsletter – May 2022
The topics discussed in this monthly newsletter are as follows:
1. ETF Connect marks another milestone in mutual market access
2. Court orders Pyramid and Ponzi scheme fraudsters to compensate investors
3. SFC bans Ho Pak Hay for life
MARKET NEWS
1. ETF Connect marks another milestone in mutual market access
The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) today announced details for the implementation of plans to include eligible exchange-traded funds (ETFs) in Stock Connect.
According to the joint announcement, the principal arrangements for ETF Connect will follow the existing fund operations, regulations and operational models governing trading and clearing in the two markets.
“ETF Connect is another milestone in the expansion of mutual market access between Hong Kong and Mainland China,” said Mr. Ashley Alder, the SFC’s Chief Executive Officer.
Significance:
Investors in both markets are provided with more choices, and help foster a healthy development of ETF by expanding the investor base and improving liquidity in the market.
ENFORCEMENT NEWS
2. Court Orders Pyramid and Ponzi scheme fraudsters to compensate investors
Under the scheme, DFRF and its founder Filho falsely claimed that DFRF would soon be listed in the US, and persuaded a number of Hong Kong investors to acquire “membership units”. DFRF also falsely claimed that investors would be offered the option to convert their units into preferred shares of DFRF at certain price.
In December 2016 and March 2017, the SFC obtained interim injunctions to freeze the assets of DFRF in their two bank accounts. And the Court has appointed administrators to receive and distribute the proceeds of the scheme remaining in the two bank accounts – approximately totalling $2.8 million – for the benefit of the investors on a pro rata basis.
Significance:
The global scale of such a scam as the Ponzi scheme is really unprecedented in recent decades. The scheme camouflaged itself as a type of investment scheme where the founders (basically the "crooks") stole money from investors and masked the theft by funneling returns to clients from funds contributed by newer investors.
3. SFC bans Ho Pak Hay for life
The SFC has banned Mr. Ho Pak Hay, a former licensed representative of KGI Asia Limited (KGI) and KGI Futures (Hong Kong) Limited (KGI Futures), from re-entering the industry for life.
It was found that Ho had misappropriated and misused funds totalling $1.8 million from the clients between 2018-2019; instead of making investments for the clients , Ho had spent the funds on gambling, and had also issued dishonoured cheques to the clients as repayment of funds.
The SFC considers that Ho is not a fit and proper person to be licensed, and has decided that a life ban on Ho is appropriate and commensurate with the gravity of his conduct.
Significance:
Ho had misappropriated client money and undermined the fundamental principles of GP1 of “Honesty and Fairness” as a licensed person, and GP8 of “Client Assets” being adequately safeguarded.
For more details, please click on the title of the topic above.
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