The Hong Kong Securities and Futures Commission (SFC) reprimanded and fined Kylin International (HK) Co., Limited (Kylin) HKD 9 million for multiple regulatory failures in managing private funds over a three-year period. The misconduct related to Kylin’s role as investment manager or consultant for six sub-funds of a Cayman-incorporated fund between August 2018 and July 2021. The SFC identified failures to manage and disclose conflicts of interest arising from six loans extended by Kylin or its director to four sub-funds, and failures to conduct monthly reconciliations and regular valuations, or to appoint an independent auditor to audit the sub-funds’ financial statements. It also found inadequate systems and controls for know-your-client and suitability assessment, deficient record-keeping to demonstrate compliance with anti-money laundering and counter-terrorist financing requirements, and misrepresentations to investors that Kylin was exempt from the suitability assessment requirement because investors were classified as professional investors. The SFC considered the misconduct attributable to senior management failings, holding responsible officer and chief executive officer Steven Wong Yung accountable for all failures, and director and manager-in-charge Zhu Hong responsible for the loan-related and AML/CTF failures. In setting sanctions, the SFC cited deterrence, the potential impact on market confidence and integrity, remedial measures taken after an SFC limited review in late 2020, and Kylin’s cessation of regulated activities and current unlicensed status. Kylin was licensed for Type 9 (asset management) from 4 April 2014 to 22 January 2025, ceased regulated activities on 31 December 2023, and had its licence revoked on 22 January 2025 following an application; the SFC also pointed asset managers to its 9 October 2024 circular indicating it would step up disciplinary action and impose harsher penalties for similar or persistent misconduct.

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