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Explain whether "Unacceptable" is correct or incorrect with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words.

Explain whether "Unacceptable" is correct or incorrect with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words.

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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The Securities and Futures Commission (SFC) has banned Mr Wang Can, a former licensed representative of China Galaxy International Securities (Hong Kong) Co., Limited (CGIS), for 30 months for misconduct (Note 1). The SFC found that Wang asked his friend to open a securities account in September 2014 and conducted personal trading in that account for at least nine months. Wang became privy to information regarding a proposed acquisition of Linmark Group Limited (Linmark) in November 2014 when he assisted CGIS to prepare pre-engagement documentation for a potential client. He went on to purchase shares of Linmark through his friend's account and sold them two days after Linmark announced the proposed acquisition on 3 December 2014 and made a profit of $7,800 (Note 2). Wang breached CGIS' staff dealing policy by failing to disclose to his then employer his personal trading activities and beneficial interests in his friend's account. He also breached CGIS's staff dealing policy in that employees are prohibited from trading on the basis of price sensitive information or confidential information related to its clients or potential clients (Notes 3, 4 & 5). Wang was fined $7,800, equivalent to the profits that he gained from trading in the shares of Linmark (Note 5). In deciding the sanction, the SFC took into account all relevant circumstances, including Wang's remorse and willingness to accept the SFC's disciplinary action. Notes: 1. Wang was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities and was accredited to CGIS from 9 April 2013 to 6 February 2016. Wang is banned from 16 May 2019 to 15 November 2021. 2. Linmark (currently known as Daohe Global Group Limited) was listed on The Stock Exchange of Hong Kong Limited at the material time. 3. Paragraph 9.3 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) requires licensed corporations to have in place procedures to ensure that their employees do not deal (for the benefit of the licensed corporation, employee or client) in securities where the employee concerned effects the dealing on the basis of non-public information which would be expected to materially affect the prices of those securities and which is to be released to the market. 4. Paragraph 12.2 of the Code of Conduct requires licensed corporations to implement procedures and policies on employee trading and to actively monitor the trading activities in their employees' accounts and their related accounts. 5. General Principle 1 (honesty and fairness) of the Code of Conduct provides that a licensed person should act honestly, fairly, and in the best interests of its clients and the integrity of the market. Question : Explain whether "Unacceptable" is correct or incorrect with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words.
Transcribed Image Text:The Securities and Futures Commission (SFC) has banned Mr Wang Can, a former licensed representative of China Galaxy International Securities (Hong Kong) Co., Limited (CGIS), for 30 months for misconduct (Note 1). The SFC found that Wang asked his friend to open a securities account in September 2014 and conducted personal trading in that account for at least nine months. Wang became privy to information regarding a proposed acquisition of Linmark Group Limited (Linmark) in November 2014 when he assisted CGIS to prepare pre-engagement documentation for a potential client. He went on to purchase shares of Linmark through his friend's account and sold them two days after Linmark announced the proposed acquisition on 3 December 2014 and made a profit of $7,800 (Note 2). Wang breached CGIS' staff dealing policy by failing to disclose to his then employer his personal trading activities and beneficial interests in his friend's account. He also breached CGIS's staff dealing policy in that employees are prohibited from trading on the basis of price sensitive information or confidential information related to its clients or potential clients (Notes 3, 4 & 5). Wang was fined $7,800, equivalent to the profits that he gained from trading in the shares of Linmark (Note 5). In deciding the sanction, the SFC took into account all relevant circumstances, including Wang's remorse and willingness to accept the SFC's disciplinary action. Notes: 1. Wang was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities and was accredited to CGIS from 9 April 2013 to 6 February 2016. Wang is banned from 16 May 2019 to 15 November 2021. 2. Linmark (currently known as Daohe Global Group Limited) was listed on The Stock Exchange of Hong Kong Limited at the material time. 3. Paragraph 9.3 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) requires licensed corporations to have in place procedures to ensure that their employees do not deal (for the benefit of the licensed corporation, employee or client) in securities where the employee concerned effects the dealing on the basis of non-public information which would be expected to materially affect the prices of those securities and which is to be released to the market. 4. Paragraph 12.2 of the Code of Conduct requires licensed corporations to implement procedures and policies on employee trading and to actively monitor the trading activities in their employees' accounts and their related accounts. 5. General Principle 1 (honesty and fairness) of the Code of Conduct provides that a licensed person should act honestly, fairly, and in the best interests of its clients and the integrity of the market. Question : Explain whether "Unacceptable" is correct or incorrect with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words.
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