A British Columbia Securities Commission (BCSC) panel has fined and permanently banned Hong Liang Zhong from the province’s capital markets for fraud, unregistered trading and offering clients false guarantees to reimburse them for any losses.
In May 2015, the panel found that Zhong recruited 14 people to open foreign exchange (Forex) accounts, over which he was given trading authority. The panel determined that Zhong was engaged in the business of trading in securities on behalf of his clients without being registered. It also found that he perpetrated a fraud by misrepresenting the true nature of his commissions for Forex trading to investors, by failing to inform them that he would receive a commission based on the volume traded. In addition, the panel found that Zhong breached securities laws by guaranteeing at least 10 of his clients that he would return their full principal if they suffered trading losses.
Discussing the impact of Zhong’s misconduct, the panel wrote, “It is trite to say that Zhong’s misconduct has done significant harm to the reputation and integrity of our capital markets. Investors become hesitant to invest in the market if they cannot trust those who trade and advise on securities to be ethical and to carry on these activities in compliance with applicable securities laws.”
The panel ordered that Zhong pay to the BCSC $401,883.44 (the sum of $390,048.90 being the amount Zhong’s clients lost as a result of his misconduct and the $11,834.54 in trading agent fees Zhong earned on these investors’ accounts). Zhong was also ordered to pay an administrative penalty of $250,000.
The panel ordered that Zhong resign any position he holds as a director or officer of any issuer or registrant, and he is permanently prohibited from becoming or acting as a director or officer of any issuer or registrant. He is also permanently banned from trading or purchasing securities or exchange contracts, acting as a registrant or promoter, engaging in investor relations activities, and acting in a management or consultative capacity in connection with the securities market.