The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited, reprimanded and fined HSBC Securities Brokers (Asia) Limited (HSBC Securities) following disciplinary action taken against it over breaches of various Broker-to-Client Assigned Number (BCAN) requirements set out in the Rules of the Exchange.

HSBC Securities is a registered Exchange Participant and China Connect Exchange Participant (CCEP), and is bound by the Rules of the Exchange. Between January 2020 and October 2021, multiple incidents of BCAN related errors were brought to the Exchange’s attention by HSBC Securities. 

From the Exchange’s investigation findings, it was revealed that HSBC Securities has failed to:

• ensure accuracy of the Client Identification Data (CID)¹ in the submitted BCAN-CID Mapping File;
• obtain the Exchange’s written approval for changing or re-using BCANs;
• ensure only one BCAN is assigned to one client; and
• ensure accuracy of tagging of order to the corresponding BCAN.

HSBC Securities’ BCAN errors amounted to breaches in a number of requirements of Rule 1425A of the Rules of the Exchange² and affected a total of 92 clients and over 3 million orders.

In deciding the disciplinary sanctions against HSBC Securities, the Exchange took into account all relevant circumstances, including:

• HSBC Securities self-reported the breaches;
• HSBC Securities’ timely remedial measures, including engaging external consultants to review its internal controls of BCAN related matters to expedite completion of remediation work;
• HSBC Securities’ cooperation with the Exchange in addressing the Exchange’s concerns, accepting the Exchange’s findings in full and resolving the disciplinary proceedings in an expedited manner;
• the clients affected by HSBC Securities’ failures had not suffered any financial loss; and
• HSBC Securities’ otherwise clean disciplinary record with the Exchange. 

The Exchange considers any violation of rules a serious impediment to its duties of maintaining the integrity of the market, and the sanctioning of appropriate disciplinary actions is a clear message to the market that such non-compliance is not acceptable.

Exchange Participants engaging in Northbound Trading of China Connect Securities are strongly advised to review their current set up and adopt appropriate measures to strengthen their controls to ensure compliance with the applicable requirements under Rule 1425A of the Rules of the Exchange, and where necessary, take immediate rectifying actions and report to the Exchange in a timely manner.

The Exchange has been working closely with the Securities and Futures Commission (SFC) during this investigation. The Exchange will continue to collaborate with the SFC on enforcement matters concerning participants of the Exchange and licensed corporations and registered institutions regulated by the SFC.

A copy of the Statement of Disciplinary Action is available on the HKEX website.

Notes:

1. CID means the name, identity document type, identity document issuing country or jurisdiction and identity document number in relation to a client to whom a BCAN is assigned.
2. Under Rule 1425A of the Rules of the Exchange, CCEP and Trade Through Exchange Participant are required to, amongst others, ensure the BCAN-CID Mapping File is accurate and up to date; BCAN assigned to a client should not be changed or re-used unless with the Exchange’s prior written approval; assign one BCAN for one client; and ensure correct tagging of BCAN to each corresponding order on a real-time basis.

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