The Securities and Futures Commission (SFC) in Hong Kong has imposed an $8 million penalty on Instinet Pacific Limited due to its noncompliance with established reporting mandates for direct business transactions and cross trades within The Stock Exchange of Hong Kong Limited (SEHK).
The SFC’s investigation into the matter uncovered significant lapses from December 2012 to March 2018, during which the firm failed to report 8,817 pairs of cross trades that totaled approximately $25.9 billion. These transactions involved trades between clients and an associated company, which were not reported as required by the Code of Conduct set forth by the regulatory authority.
Additionally, the investigation highlighted that Instinet lacked any internal policies or procedures to ensure proper reporting and monitoring of these cross trades during the relevant timeframe. Furthermore, it was noted that the firm did not carry out any reviews concerning its trade reporting practices, which is a critical component of regulatory compliance.
In determining the financial sanction, the SFC considered a range of factors, including the duration of noncompliance, the volume of unreported trades, the overall monetary value involved, and the company’s actions taken to rectify the situation. This included the cessation of the problematic trading practices and cooperation with the SFC to address the concerns raised during the investigation.
The enforcement of this penalty serves as a reminder of the importance of adherence to regulatory standards in the financial services sector, particularly in the reporting of trades, which is vital for maintaining the integrity of the market and protecting investors.