Hong Kong Securities and Futures Commission sets account opening and client relationship controls after finding forged document failures at brokers

The Hong Kong Securities and Futures Commission has issued a circular setting expected controls for account opening and the maintenance of client relationships after a review found serious weaknesses at securities brokers and heightened risks of suspicious or illicit transactions. All licensed corporations must conduct an internal review as soon as practicable to identify whether any questionable or forged documents were accepted during account opening. The review of 12 securities brokers found inadequate due diligence on account opening documents, acceptance of questionable or forged documents, and weaknesses in managing cross-border correspondent relationships with overseas intermediaries. For investment accounts of Chinese Mainland investors, firms must close accounts opened using questionable or forged documents and zero-balance dormant accounts, obtain written investor declarations, and for new accounts require settlement and all deposits and withdrawals to pass only through bank accounts in the client’s own name with eligible banks. Firms serving investors outside Hong Kong are reminded to comply with relevant requirements in Hong Kong and the applicable overseas jurisdictions, and the Commission said serious control lapses could trigger supervisory and enforcement action against firms and senior management.