Licensing Fraud

As announced on 4 Feb 2019, SFC revoked the licence of W. Falcon Asset Management (Asia) Limited (Falcon) for window-dressing its liquid capital, breaching the terms of a restriction notice and failing to provide timely notification of the resignation of its director who engineered the window-dressing scheme.

Falcon provided SFC with false or misleading information in its licence application and financial returns between Jun 2014 and Jun 2017.

Falcon window-dressed its month-end liquid capital by including in its liquid capital computation the amount of certain cheques, which were subsequently dishonoured.  This practice was adopted from the time of Falcon's SFC licence application. Had the amount of these cheques been excluded, Falcon would have been denied a licence to carry on regulated activities due to a liquid capital deficit at the time of its licence application and at each of the month-ends over a three-year period.

In May 2017, the director of Falcon guaranteed a loan taken out in the name of Falcon. Two months later, SFC issued a restriction notice against Falcon after a self-report by Falcon that its liquid capital had dropped below the required level. Subsequently, Falcon defaulted on repayment of the loan and proceeded to enter into a debenture with the lender, thereby subjecting its assets to a floating charge, contrary to the terms of the restriction notice.

The director resigned from Falcon on 23 Oct 2017, but both the director and Falcon failed to provide SFC with written notification of such resignation within 7 business days as required.

This was indeed a fraud case. SFC must chase those fraudsters.

Subsequent update on 19 Dec 2019:

• SFC banned Mr Ang Wing Fung, the former chairman of Falcon, and its former CFO and company secretary Mr Chan Kam Wah, from re-entering the industry for life and 3 years, respectively, in connection with their roles in window-dressing the liquid capital of Falcon.

• Ang was the mastermind of the window-dressing scheme and its operation was facilitated by Chan.

• Chan, who reported to Ang, had full access to various bank accounts of which Ang was a signatory. As the person in charge of accounting, he was fully aware of the true financial condition of Falcon. He was also aware that cheques signed by Ang would certainly be dishonored upon presentation due to insufficient funds in the bank accounts on which they were drawn and closure of some of these accounts. But he continued to take part in the window-dressing scheme to disguise Falcon's failure to maintain sufficient capital.