The Securities & Futures Commission has reprimanded Ewarton Securities' Ng Yan-ngai, Yu Hing-fai and Chan Yu-man for short selling, and fined the first two $40,000 and the latter $30,000.

The commission found Ng, Ewarton's sole responsible officer, failed to take effective measures to detect and prevent short selling of securities. He did not ensure it enforced its written staff dealing policy, and the then manager of Ewarton's Sham Shui Po branch.

These failings allowed Chan and Yu, the licensed representatives at Ewarton's Sham Shui Po branch, to engage in short selling activities between April and September 2003.

Clean records

In deciding the fine, the commission considered the Disciplinary Fining Guidelines and case circumstances, such as their clean records. The commission also found no investors or market users were adversely affected, and the company has strengthened its short selling controls.

Commission Executive Director of Enforcement Alan Linning said a brokerage's systems and controls are only effective if they are properly enforced.

"Failure to enforce systems and controls may facilitate employee misconduct and prejudice the interests of both the brokerage and its clients. The responsibility to ensure all internal control measures are effectively enforced falls on the responsible officer. All brokerage firms are expected to employ sufficient resources and procedures for the proper performance of their business operations."