Hong Kong’s Securities and
Futures Commission has reprimanded Deutsche Securities Asia Limited and fined
it HK$2.5 million (around $322,000) for regulatory breaches and internal
control failings relating to position limit failures. The move, while not directly relevant to wealth management, highlights how regulators in the jurisdiction are flexing their muscles in cases of alleged rule breaches.

The action comes after the SFC investigated the business concerning
57,403 contracts in China Construction Bank stock options in breach of the
prescribed position limit of 50,000 contracts on 1 September 2011, the SFC said
in a statement on its website. The investigation into the business had been at the behest of its client, Deutsche Bank, the SFC said. 

“The SFC found that Deutsche Securities Asia Limited failed to
enforce its internal control procedures to ensure that all open positions in
stock options contracts it held or controlled were in compliance with the
prescribed position limits,” it said.

“The SFC considers the failings of Deutsche Securities Asia
Limited more serious because it had already been told by an independent
reviewer in 2007 that its real time monitoring system for position limits could
not capture proprietary trades executed via external brokers,” it said.

“Although Deutsche Securities Asia Limited was aware of the
limitation to its monitoring system and had put in place a policy and
procedures to address this, it failed to implement and enforce the policy and
procedures,” the SFC said. It added that it has taken account of Deutsche
Securities Asia Limited’s cooperation with proceedings and moves to tighten
internal controls.