Breach of Placing Guidelines

In a bull stock market, placing is not just a profitable business for brokerage houses, but also a temptation to personal trading through secret accounts.

SFC recently reprimanded Wintech Securities Ltd and fined it $450,000 by finding that:

• Wintech failed to act in the best interests of market integrity when a number of Wintech staff, including a former director and responsible officer (Tsap Wai Ping), subscribed for shares and received their allocations in an IPO through the accounts of two clients;
• the allocations breached the Placing Guidelines for Equity Securities under Appendix 6 of the Main Board Listing Rules, where no consent was sought or given for an allocation to directors or employees of a placing agent.

Apart from hiding his IPO subscription, Tsap had also:

• signed new client agreements as a witness when he was not present at the time of execution by the clients; and
• accepted instructions from an unauthorised third party to withdraw funds from a joint client account without receiving any valid withdrawal instruction from the clients or properly verifying the clients' signatures.

Tsap has been banned from re-entering into the industry for one year and fined $180,000.

Back to the basics - If the account opening process is robust enough, there would not be so many loopholes for improper personal trading.