SFC slaps Huatai Financial Holdings with $800,000 fine over short selling failures

The stock broker short-selled bonus shares.

The Securities and Futures Commission (SFC) has slapped stock broker Huatai Financial Holdings Limited with a $800,000 fine over its failures relating to the short selling of Great Wall Motor Company Limited (Great Wall) shares back in 2015, according to a government statement. 

Also read: SFC slaps $2m fine on HPI Forex Limited

The investigation found out that when Great Wall announced the proposed bonus issue of its shares on September 2015, Huatai Financial Holding manually booked an entry in its trading system to reflect its entitlement to 360,000 bonus shares as a result of its pre-existing holding of 180,000 Great Wall Shares.

The entry caused Huatai Financial’s trading system to show a total of 540,000 Great Wall shares as a single position without differentiating between its pre-existing holding of 180,000 shares and the 360,000 bonus shares which were unsettled.

Moreover, in October 6, a proprietary trader at Huatai wrongly assumed that the bonus shares had become unconditional and placed an order to sell 500,000 Great Wall shares, causing Huatai Financial to become short by 320,000 shares. 

“The SFC considers that Huatai Financial failed to act with due skill, care and diligence in dealing in the bonus shares and to diligently supervise its staff members and implement adequate and effective systems and controls to ensure compliance with the short selling requirements,” the regulator said in a statement.