Celestial Securities and its responsible officer Horace Kwan have been reprimanded for internal-control failures and fined $21,000 and $7,000, the Securities & Futures Commission says.

The disciplinary action follows the commission's probe into a Celestial client's short-selling activities. The client was a former staff member who placed short-sell orders directly with Celestial dealers between October 17 and November 11, 2003.

The investigation revealed Celestial's unclear policy administration caused confusion to its dealers. The company also failed to put in place effective procedures to detect and prevent intra-day short selling; and to implement and maintain measures appropriate to ensuring compliance with the applicable law and codes the commission issued.

At all material times, Kwan was one of Celestial's responsible officers who was involved in approving the company's internal controls. He supervised Celestial's dealers and daily operation.

The commission concludes Celestial and Kwan have been guilty of misconduct and their fitness and properness has been called into question.

In determining the fine, the commission has taken into account the disciplinary fining guidelines and all the circumstances of the case including the cooperation by Celestial and Kwan in settling the disciplinary actions with the commission.