Hong Kong’s Securities and Futures Commission has issued an official warning and fined HPI Financial Group on 2 million Hong-Kong dollars for violation of Client Money policy.
The investigation revealed that HPI had transferred their client funds on the amount of 8 million Hong-Kong dollars from its segregated account at DBS Bank to the account of its foreign brokers (FXCM and Interactive Brokers LLC). It should be mentioned, that FXCM was banned in the USA for defrauding its customers and recently changed its name Leucadia National Corporation which, naturally, raise suspicions. SFC has found evidence of 6 such transactions being made by HPI.
HPI’s accounts in FXCM and Interactive brokers, despite being named as “client accounts” were not established with an authorized financial institution approved by the SFC. According to the State of Conduct, the company violated the rule to keep client funds in the separate account in a bank in Hong Kong.
Moreover, the investigation showed that HPI Financial Group used the funds which were transferred to their fraud partners to conduct proprietary transactions (extremely high-risk strategy where instead of acting on clients orders and receiving commission payments, the trader assumes his own position with the capital of the firm. This means they will experience the full profit or loss of the position).
It should be said that a punishment could have been much harder if HPI did not cooperate with the regulatory authority. The company reversed its clients funds back to Hong-Kong bank. In addition to that, no evidence has been found that HPI’s clients suffered losses.