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Alternative Market Briefing

HK regulator reprimands, fines Morgan Stanley Hong Kong Securities over short selling, internal control failures

Thursday, August 25, 2016

Komfie Manalo, Opalesque Asia:

Hong Kong’s market regulator Securities and Futures Commission (SFC) has reprimanded and fined Morgan Stanley Hong Kong Securities Limited (MSHK) $2.4m over its failure to disclose short selling orders and other internal control breakdowns.

The SFC said that MHSK breached the Code of Conduct related to avoidance of conflicts of interest; disclosure of short selling orders; comprehensive documentation of its electronic trading systems; compliance with position limits and reporting of Large Open Positions; and execution of client instructions in connection with futures and stock options contract reporting obligations.

Specifically, the SFC’s investigations found that MSHK failed to:

  • Ensure compliance with the disclosure requirement in relation to approximately 29,000 short selling orders between January and November 2014;
  • Adequately avoid conflicts of interest between principal and agency trading and obtain client consent for a facilitation execution in June 2013;

  • Comprehensively document the design and operation of the price checks and controls applied to orders executed through its electronic trading systems after the electronic trading provisions in the Code of Conduct took effect in January 2014;

  • Ensure compliance with the position limits, which resulted in one stoc......................

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