Hong Kong's Securities and Futures Commission has imposed a penalty, of interest to all wealth firms that are subject to the Code of Conduct for Persons Licensed by or Registered with the SFC, on RHB Securities Hong Kong Ltd for ignoring conflicts of interest and failing to supervise its account executives properly.

RHB said that the discretionary trading went undetected because the account and the executive were not caught by any of the checks that it ran on telephone recordings. The SFC attributed this to the fact that RHB's sample checks were decidedly feeble because they only covered the order records of 10 trades each month. The SFC's message here is clear: "The frequency and extent of review should be commensurate with the size of business. RHB had over 70 account executives [so] its sample  checking [was] inadequate to offer any meaningful control."

The SFC says that RHB contravened General Principles 2, 3 and 6 and paragraphs 4.2, 5.4, 7.1, 16.3, 16.4, 16.5, 16.7 and 16.10 of the Code of Conduct. It was less than impressed by the fact that these contraventions only came to light during one of its visits.