Third broker breaches transaction norms
Updated: 2006-08-08 06:18
By Hui Ching-hoo(HK Edition)
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In the third such case in the last three months, Wing Yip Company, a small broker, was found yesterday breaching securities regulations and misappropriating clients' money.
Earlier, two small brokers Tiffit Securities and Whole Win Securities were found violating the transaction norms.
The slew of scandals will force tightening of market supervision and push a number of small brokers to the sidelines, analysts said.
Market watchdog Security and Futures Commission (SFC) yesterday announced that the dealing firm Wing Yip Company was found in breach of securities regulations of misappropriating client's accounts. The shortfall in client's securities involved about HK$4.3 million.
The SFC issued a restriction notice to Wing Yip asking it to preserve the company assets and prohibit it from carrying on activities conducted on behalf of its clients.
Wing Yip was found violating Securities and Futures (Financial Resources) Rules (FRRs) during the unannounced inspection by the SFC yesterday. The SFC also found that the firm had deficit in the required capital as on 30 June 2006.
Admitting the embezzlement of funds, Yip Kowk-kay, the major shareholder of Wing Yip, said that he had misappropriated client's securities and provided false statements to the clients concerned.
Yip apologized to the investors and peers saying that it was because of his personal misconduct and had nothing to do with the market as a whole.
Allaying fears of the clients, Yip said that 90 per cent of the company's clients would not be affected by the incident. The firm is working with the SFC to resolve the problem, he added.
Wing Yip currently has about 280 active cash clients. Many anxious clients rushed to Wing Yip's Central head office yesterday to get to know what exactly happened.
"It's like adding ice to snow," said an anonymous analyst, using a Chinese phrase to describe a worsening situation.
Even if it is considered an individual case, the incident will shake the investors' confidence about small brokers, he said. And this will make their life "harder and harder" as they have already faced strong competition from banks and lost ground.
The SFC has urged the investors to use the Investor Participant account (IP account) or Stock Segregated Account with Statement Service (SAA) rather than simply open account in brokerage firms.
Meanwhile, Anthony Espina, chairperson of Hong Kong Stockbrokers Association, said the funds embezzlement was an individual case, which will not shake market's foundation.
"If investors have no confidence about their brokerage firms, they can transfer their equities from brokerage firm's accounts to SAA at CCASS (central clearing and settlement system)," said Espina. "We believe the watchdog has sufficient resources to monitor the market."
He also said that the association was discussing with HKEx to upgrade the SAA's function.
Although investors are jittery, following a series of crackdown on local securities firms, some investors prefer using brokerage firms accounts because of their effective and flexible transaction services.
In the Tiffit Securities and Whole Win Securities fraud cases, about 1,600 and 450 clients were affected respectively.
(HK Edition 08/08/2006 page3)