Hong Kong’s SFC fines Fulbright Securities Limited HK$3.5 million worth $450,000 for infringing naked short selling rules. In accordance with the SFC’s filing, the event took place between October 2015 and March 2016, when Fulbright administered at least 93 short sales. The report discovered errors in its internal controls and systems. Thus, figuring that the company declined to set in place controls to identify and stop illegal trades.
Fulbright Securities infringes short-selling rules.
According to the reports, Fulbright failed to pay attention to the accuracy of the data submitted to the SFC. Moreover, it did not report these incidents after discovering the errors. Further, short selling allows investors to book gains in a falling market. By borrowing security, they don’t hold, sell it, and agree to purchase it back at a lower price. This contributes a significant part in developed capital markets since it makes price discovery more efficient. It also smoothens the volatility while offering investors a range of risk-management tools.
Hong Kong mandates firms to deliver the share, following the conclusion of a short sale transaction. It happens on the settlement data or requires positive action to block out the “failure to deliver” shares by buying or borrowing the securities. The agent has no alternative to restrain continuing naked short positions but to refuse any further sale orders if the securities were not addressed or closed out in lawfully imperative time frames.
Fulbright Securities Limited was amongst three brokers the SFC banned last year from receiving or executing orders. The SFC placed ban on derivative warrants in client accounts connected to suspected market misconduct. While the SFC didn’t recognize who it speculates to have performed this market offense, it emphasized that it was not examining the three brokers in question. Further, the regulator said that the three organizations had supported its ongoing investigation.
On making the final call, the SFC announced Fulbright Securities had been cooperating through its investigation, and there is no indication that failures were calculated. Moreover, the company had taken concrete and comprehensive remediation work. It has also led a further-looking review of its internal controls to assure compliance with the significant regulatory requirements.
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