The Securities & Futures Commission has reprimanded and fined Luen Fat Securities Company Limited $150,000, and one of its responsible officers, Teresa Wong, $30,000 for internal control failings.

The commission's inspection in September 2003 revealed a number of internal control failings in Luen Fat's operations, including:

* re-pledging securities of certain margin clients to banks without valid standing authority from clients;

* transferring approximately $24,000 in interest accrued from client money to its own account without clients' consent;

* keeping inadequate audit trails of client orders;

* inadequate monitoring of staff dealing transactions; and

* inadequate supervision and monitoring of discretionary accounts.

The commission viewed Luen Fat's failings more seriously than usual, as some of the deficiencies were previously detected during an inspection in 2000, and the company failed to take remedial measures. The failings were unintentional and a result of omissions and oversight.

As a responsible officer of Luen Fat, Teresa Wong bore responsibility for the negligent failings. The commission concluded the fitness and properness of Luen Fat and Teresa Wong has been called into question.

In deciding the fines, the commission has considered the Disciplinary Fining Guidelines and all the circumstances of the case including the fact that:

* some of the failings were repeated breaches;

* the management who were responsible in 2000 have since left Luen Fat;

* Luen Fat has taken remedial action and strengthened its internal control system;

* no loss or damage to clients was identified;

* Luen Fat was previously disciplined; and

* Luen Fat co-operated with the commission.

This disciplinary action is the result of a settlement between Luen Fat, Teresa Wong and the commission, which is considered to be in the interests of the investing public.

"Licensed corporations have been repeatedly reminded that it is paramount for them to have adequate internal controls," the commission's Enforcement Executive Director Alan Linning said.

"Responsible officers have a duty to ensure the adequacy of internal control systems to achieve regulatory compliance. Lax controls are unacceptable because they expose the licensed corporations and their clients to unnecessary risks and possible losses," he added.

"Licensed corporations should properly address deficiencies which have been identified in inspections. Repeated breaches will not be condoned and are considered as an aggravating factor which will be reflected in the penalty imposed."