A licensed entity was recently reprimanded and fined HK$6 million by the SFC for internal control deficiencies in a number of areas including anti-money laundering, client asset handling and personal account dealing. The SFC found that the entity failed to have in place an effective compliance function and stated "its fitness and properness has been called into question". Mark Steward, the SFC's Executive Director of Enforcement, said, "This case should send a clear warning to the industry that cavalier attitudes have no place in our market."
This enforcement case follows a speech in June by James Shipton (SFC Intermediaries Division Executive Director) on the importance and significance of the human element (ethics, integrity and professionalism) in good corporate culture. According to Mr Shipton, the SFC will "be broadening our supervisory approach so that when we look at the control systems and procedures at firms, we will also consider the "control culture" - that is, the culture and leadership dimensions of firms - in order to more fully understand how a firm's control systems operate in practice." The SFC will be "looking beyond the mere existence of a compliance or control framework to see if it has a supporting culture"
When reviewing their compliance systems and operations, licensed corporations are reminded to look beyond the details of the system itself and ensure that the firm’s organisational culture supports professionalism and a compliance ethic.