SFC reprimands and fines Kylin International (HK) Co., Limited $9 million for fund management failures
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The Securities and Futures Commission (SFC) has reprimanded and fined Kylin International (HK) Co., Limited (Kylin) $9 million for multiple failures in managing private funds over a period of three years (Notes 1 and 2).
The SFC found that while acting as the investment manager or consultant for six sub-funds of a Cayman-incorporated fund between August 2018 and July 2021, Kylin failed to fulfil its regulatory obligations in five key areas.
First, Kylin failed to manage and disclose conflicts of interest arising from six loans extended by it or its director to four of the sub-funds. Second, it did not perform monthly reconciliations or regular valuations of the sub-funds’ assets, nor did it appoint an independent auditor to audit the sub-funds’ financial statements. Third, it failed to implement adequate systems and controls for know your client and suitability assessment. Fourth, it neglected to maintain records demonstrating compliance with anti-money laundering and counter-terrorist financing (AML/CTF) regulations.
Fifth, it misrepresented its regulatory obligations by incorrectly informing investors that it was exempt from the suitability assessment requirement as they were classified as professional investors.
During the relevant period, Mr Steven Wong Yung was a responsible officer and the chief executive officer of Kylin, while Ms Zhu Hong was a director and manager-in-charge of various core functions of Kylin. The SFC considers that Kylin’s misconduct was attributable to Wong’s and Zhu’s failures to discharge their duties as members of Kylin’s senior management. Specifically, Wong was accountable for all of Kylin’s failures, whereas Zhu was responsible for the failures related to the loans and Kylin’s AML/CTF compliance (Note 3).
In deciding the disciplinary sanctions against Kylin, the SFC has taken into account all relevant considerations, including the following:
Kylin’s failures have the potential to undermine public confidence and damage market integrity;
a strong deterrent message must be sent to the market that the SFC will not tolerate misconduct as shown in Kylin’s failures;
Kylin implemented remedial measures subsequent to a limited review conducted by the SFC into Kylin’s business activities in late 2020;
Kylin has ceased carrying on regulated activities and is no longer licensed; and
Kylin has an otherwise clean disciplinary record.
End
Notes:
Kylin was licensed under the Securities and Futures Ordinance to carry on Type 9 (asset management) regulated activity from 4 April 2014 to 22 January 2025. It ceased carrying on regulated activities on 31 December 2023. Following its application, the SFC revoked its licence on 22 January 2025.
Asset managers are reminded to refer to the circular to licensed corporations engaged in asset management business issued by the SFC on 9 October 2024, which sets out deficiencies and substandard conduct noted in the management of private funds and discretionary accounts. As stated in paragraph 6 of the circular, the SFC will step up its disciplinary actions and impose harsher penalties against similar or persistent misconduct to send a strong deterrent message to preserve the integrity of our market and instil confidence in the investing public.
Please refer to the SFC’s press release dated 19 March 2025 for information regarding the SFC’s disciplinary action against Wong, and its press release dated 18 August 2025 for information regarding its disciplinary action against Zhu.