The Hong Kong Securities and Futures Commission has reprimanded and fined XHK Limited HKD 2.5 million after finding failures in its regulatory financial returns, maintenance of required liquid capital, and handling of client and non-client money. The enforcement action followed an investigation triggered by XHK’s self-reports. It found that the firm misstated its liquid capital in returns submitted under the Securities and Futures (Financial Resources) Rules and breached the Securities and Futures (Client Money) Rules, with those failures also amounting to breaches of the Code of Conduct. From January 2020 to June 2021, accounting errors in XHK’s financial returns led to both overstatements and understatements of liquid capital. After correction, the firm was found to have been in deficit against its required liquid capital by HKD 3.6 million to HKD 32.3 million for four months. The errors were linked to inadequate assurance that external service providers preparing the returns were competent and to staff not being sufficiently familiar with the Financial Resources Rules. Separately, between March and April 2021 XHK transferred up to HKD 206 million of client money from segregated accounts to overseas brokers without the written direction or standing authority required from the client, and between February 2019 and October 2021 it failed to remove non-client money, including about HKD 38 million in commissions and interest earned on client money, from segregated accounts within one business day after becoming aware the funds were not client money. In setting the sanction, the Commission took into account the duration and extent of the failures, XHK’s remedial measures, the absence of client loss, its otherwise clean record, and its cooperation and acceptance of the findings.
Hong Kong Securities & Futures Commission2026-06-01
Hong Kong Securities and Futures Commission fines XHK Limited HKD 2.5 million for liquid capital deficits and client money breaches
The Hong Kong Securities and Futures Commission has reprimanded and fined XHK Limited HKD 2.5 million for misstating liquid capital in regulatory returns, failing to maintain required liquid capital, and breaching client money rules and the Code of Conduct. The investigation, triggered by XHK’s self-reports, found prolonged capital deficits, improper transfers of up to HKD 206 million of client money without required authority, and failures to promptly remove non-client money from segregated accounts. In setting the sanction, the Commission considered the duration and extent of the breaches, remedial measures, absence of client loss, XHK’s clean record, and its cooperation.