The Securities and Futures Commission (SFC) has banned Mr Dennis Cheng Chung Sing, a former trader of Goldman Sachs (Asia) L.L.C. and Goldman Sachs (Asia) Securities Ltd (collectively, Goldman Sachs), from re-entering the industry for six months from 20 September 2024 to 19 March 2025 (Note 1).
The disciplinary action follows an SFC investigation which found that on 24 August 2020, Cheng erroneously placed a client order for buying company X shares. Instead of 2,232,000 shares, he wrongly inputted 232,000 shares into the system, resulting in an under-execution of the client order by two million shares. Cheng was alerted to the trade execution error after market close on the same day, but he only reported it to Goldman Sachs’ management and compliance department four days later.
The SFC found that Cheng had acted dishonestly to conceal the trade execution error when he attempted to rectify it by:
arranging a facilitation trade to buy the under-executed two million shares to fill the client order (Note 2);
misrepresenting to his Goldman Sachs’ colleagues involved in the execution of the facilitation trade that he had obtained the client’s consent for the trade when he had not (Note 3); and
booking the lower price for the original trade to the client’s account instead of the higher price for the facilitation trade which made it more difficult for Goldman Sachs to identify the error.
The SFC considers Cheng’s conduct was in breach of the Code of Conduct and he is not fit and proper to be a licensed person (Note 4).
In deciding on the sanction, the SFC has taken into account all relevant circumstances, including:
Cheng’s misconduct was dishonest;
Cheng did not obtain any personal monetary gain from his misconduct and did not cause any client loss;
Cheng admitted his misconduct and self-reported the incident to the SFC;
Cheng was remorseful for his conduct; and
Cheng has an otherwise clean disciplinary record.
End
Notes:
Cheng was a licensed representative accredited to Goldman Sachs to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts) and Type 7 (providing automated trading services) regulated activities under the Securities and Futures Ordinance from 23 July 2018 to 2 September 2020. He is currently not licensed by the SFC.
In a facilitation trade, the licensed corporation acts as principal and fulfils the client’s order by buying or selling the securities from/to the client using the firm’s capital.
Paragraph 3 of the SFC’s circular to licensed corporations on client facilitation dated 14 February 2018 provides that in conducting client facilitation activities, a licensed person should disclose the nature of the trades to clients and obtain their prior consent so that they are fully aware of the inherent conflicts of interest.
General Principles 1 (Honesty and fairness) and 2 (Diligence) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) require licensed or registered persons to act honestly, fairly, with due skill, care and diligence, and in the best interests of their clients and the integrity of the market, in conducting their business activities.
Comments