The Securities and Futures Commission (SFC) has suspended Mr Shum Wai Nap, former licensed representative of PICC Asset Management (Hong Kong) Company Limited (PICC), for seven months from 20 June 2024 to 19 January 2025 for fund management failures (Note 1).
The SFC’s investigation found that while Shum was the investment manager on behalf of PICC for a Cayman-incorporated fund between May 2018 and April 2020, he failed to properly manage the fund to ensure that its investments were in line with its stated investment strategy, objectives and investment restrictions. He also failed to properly manage the risks of the fund in accordance with PICC’s policies (Note 2).
In particular, the SFC found that:
Contrary to the fund’s investment objective and strategy, there were only one to three stocks at any given point in time in the fund’s portfolio during a 21-month period from its inception in May 2018 to January 2020 (Note 3). In addition, the fund held highly concentrated positions in two Hong Kong-listed stocks, one of which was not on the permitted securities list approved by PICC’s senior management. But Shum did not take proactive steps to mitigate the risks associated with the fund’s holding of an unsuitable stock;
Shum failed to properly manage the liquidity and concentration risks of the fund in accordance with PICC’s policies, and he did not comply with PICC’s stop loss procedure.
In deciding the disciplinary sanction against Shum, the SFC has taken into account all relevant circumstances, including:
the gravity of his failures to ensure the fund’s adherence to its investment mandate and to properly manage the risks of the fund could undermine the confidence of the investing public and market integrity;
a strong deterrent message to the market that such failures are not acceptable; and
his otherwise clean disciplinary record.
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Notes:
Shum was licensed under the Securities and Futures Ordinance and was accredited to PICC from 11 September 2017 to 8 April 2020 to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities. He is currently not accredited to any licensed corporation.
Shum was designated by PICC to act as investment manager of the fund from 2 May 2018 to 8 April 2020. The SFC reprimanded and fined PICC $2.8 million for its failures to discharge duties as the manager of the fund between May 2018 and May 2020. Please refer to the SFC’s press release dated 5 February 2024.
The fund’s investment objective was to achieve capital preservation combined with steady capital appreciation over a long term through primarily investing in a diversified portfolio of equity securities.
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