17 Sep 2020
The SFC has reprimanded The Bank of East Asia, Limited (BEA) and fined it $4.2 million for regulatory breaches related to its failure to segregate client securities.
Following a referral from the HKMA and a self-report by BEA, the SFC conducted an investigation which found that BEA had failed to segregate its client securities from proprietary securities in accounts maintained at two external custodians, the Central Clearing and Settlement System and Sumitomo Mitsui Banking Corporation, Tokyo, respectively, from 1 April 2003 to 15 December 2016.
Although BEA had identified the client securities in its internal electronic accounting records, it did not comply with the regulatory requirements in that licensed corporations are required to safe-keep client securities in a segregated account designated as a trust account or client account.
In deciding the sanction, the SFC took into account all relevant circumstances, including:
- there is no evidence of client loss as a result of BEA’s regulatory breaches;
- BEA has segregated its client securities from proprietary securities following discovery of the regulatory breaches;
- BEA’s remedial actions to enhance its internal systems and controls to avoid recurrence of similar breaches; and
- BEA’s co-operation in resolving the SFC’s concerns and acceptance of the findings and disciplinary action of the SFC.