SFC bans investment consultant for four months for taking client orders on an unrecorded mobile phone

Oct122017

The Securities and Futures Commission announced yesterday that Mr Xu Tao, a former investment consultant of China International Capital Corporation Hong Kong Securities Limited (CICC), has been banned from trading for four months.

Mr Tao had used his mobile phone and WeChat messaging application to accept order instructions from 13 clients between February and August 2015, and to conduct regulated activity regulated by the Securities and Futures Ordinance.

Paragraph 3.9(b) of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that where order instructions are received from clients through the telephone, a licensed or registered person should use a telephone recording system to record the instructions and maintain telephone recordings as part of its records for at least six months.

Paragraph 3.9 of the Code of Conduct further notes that the use of mobile phones for receiving client order instructions is strongly discouraged.  However, where orders are accepted by mobile phones, staff members should immediately call back to their licensed or registered person’s telephone recording system and record the time of receipt and the order details.  The use of other formats (e.g. in writing by hand) to record details of clients’ order instructions and time of receipt should only be used if the licensed or registered person’s telephone recording system cannot be accessed.

Mr Xu’s persistent and multiple breaches of the Code of Conduct has prompted the SFC to call into question Mr Xu’s reliability, reputation, and ability to carry out regulated activities competently, as well as his fitness and properness to be licensed.

It may come as a surprising development for some, but the SFC has made their stance clear by announcing this strong penalty towards Mr Xu: trading via mobile phone and/or messaging applications is not acceptable.

Russell Bennett

The above is not intended to be relied on as legal advice and specific legal advice should be sought at all times in relation to the above.

For more information on SFO regulated activities and licence requirements, please contact:

Russell Bennett
Partner | Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.