Cathay Securities Investment Trust Co., Ltd. and Personnel Violation Penalty Case

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Cathay Securities Investment Trust Co., Ltd. and Personnel Violation Penalty Case (Jin Guan Zheng Tou Fa Zi No. 1130360256, Jin Guan Zheng Tou Zi No. 11303602561)

2025-01-14

Financial Supervisory Commission Penalty Decision

Addressee: As per original/copy Date of Issue: January 14, 2025 (Republic of China Year 114) Document Number: Jin Guan Zheng Tou Fa Zi No. 1130360256 Penalized Party: Cathay Securities Investment Trust Co., Ltd. Unified Business Number: Omitted Address: Omitted Legal Representative or Manager: Zhang [Omitted] Address: Omitted Subject: Your company violated Article 69 of the Securities Investment Trust and Advisory Act (hereinafter referred to as the SITA Act), among other provisions. Therefore, pursuant to Article 103, Paragraph 1, Item 1 of the same Act, a warning is issued to your company, and concurrently, pursuant to Article 111, Paragraph 1, Item 7 of the same Act, a fine of New Taiwan Dollars 1,200,000 is imposed.

Facts: Your company's former fund manager, Li [Omitted], while serving as a fund manager, leaked information obtained through his position to others, and during the period of trading individual stocks in the fund account, utilized another person's account to buy and sell the same individual stocks, without reporting the transactions to the company.

Reasons and Legal Basis:

1. Your company's former fund manager for the Cathay [Omitted] Fund, Li [Omitted], while serving as a fund manager, leaked information obtained through his position to Zhang [Omitted], and during the period of trading individual stocks in the fund account, utilized Zhang [Omitted]'s account to buy and sell the same individual stocks, without reporting the transactions to the company. Your company failed to fulfill its duty of supervision regarding the personal trading violations of the former fund manager Li [Omitted], which constitutes a violation of Article 13, Paragraph 2, Item 1, Article 14, Paragraph 1, and Article 14, Paragraph 2 of the Regulations Governing the Management of Heads and Business Personnel of Securities Investment Trust Enterprises, as authorized by Article 69 of the SITA Act.

2. The design and execution of your company's internal control system were ineffective, failing to effectively prevent conflicts of interest, and failing to effectively supervise and verify the personal trading behavior of fund managers. This allowed the former fund manager Li [Omitted] to leak information obtained through his position to others, utilize another person's account to buy and sell the same individual stocks traded in the fund account, and fail to report the transactions to the company. Furthermore, the company failed to conduct thorough verification regarding the aforementioned personal trading violations by Li [Omitted], and relevant operational procedures were incomplete, such as the failure to retain records of interviews with personnel. This constitutes a violation of Article 2, Paragraph 2 of the Regulations Governing Securities Investment Trust Enterprises and Article 6, Paragraph 2 of the Guidelines for the Establishment of Internal Control Systems by Various Service Providers in the Securities and Futures Markets.

3. In summary, while Li [Omitted] was serving as a fund manager for your company, he had declared compliance with personal trading regulations. However, by utilizing another person's account to trade the same targets as those in the fund account, it was determined that this significantly affected the normal execution of your company's fund business operations, and the circumstances of the violation were serious. Your company's internal control system failed to effectively supervise and verify the personal trading behavior of fund managers, and the design and execution of the internal control system were ineffective, leading to the aforementioned violations by Li [Omitted]. Therefore, this case is penalized as stated in the Subject section pursuant to the SITA Act.

Payment Method:

1. Payment Deadline: Payment must be made within 10 days from the day following the service of this decision.
2. Please follow the instructions on the payment slip attached by the Securities and Futures Bureau of this Commission for payment.

Notes:

1. If the penalized party disagrees with this decision, they must, within 30 days from the day following the service of this decision, prepare an appeal petition pursuant to Article 58, Paragraph 1 of the Administrative Appeal Act, and submit it through this Commission (18th Floor, No. 7, Section 2, Xianmin Avenue, Banqiao District, New Taipei City) to the Executive Yuan for administrative appeal. However, pursuant to Article 93, Paragraph 1 of the Administrative Appeal Act, unless otherwise provided by law, the filing of an appeal does not suspend the execution of this decision, and the penalized party must still pay the fine.
2. If the penalized party fails to pay the fine within the payment deadline specified in this decision, the case will be transferred to the various branches of the Administrative Execution Agency of the Ministry of Justice for administrative execution, pursuant to the proviso of Article 4, Paragraph 1 of the Administrative Execution Act.

Original: Cathay Securities Investment Trust Co., Ltd. (Representative: Mr. Zhang [Omitted]) Copy: Securities Investment Trust and Advisory Business Association of the Republic of China (Representative: Mr. Liu [Omitted]), Inspection Bureau of this Commission, Securities and Futures Bureau (Investment Trust and Advisory Group), Securities and Futures Bureau (Secretariat), Securities and Futures Bureau (Accounting Office)

Addressee: As per original/copy Date of Issue: January 14, 2025 (Republic of China Year 114) Document Number: Jin Guan Zheng Tou Zi No. 11303602561 Penalized Party: Li [Omitted] National ID Number or Foreigner's Nationality and Residence Permit Number: Omitted Address: Omitted Subject: Ordered Cathay Securities Investment Trust Co., Ltd. (hereinafter referred to as Cathay SIT) to dismiss the penalized party from his position.

Facts: While serving as a fund manager for Cathay [Omitted] Fund, the penalized party leaked information obtained through his position to others, and during the period of trading individual stocks in the fund account, utilized another person's account to buy and sell the same individual stocks, without reporting the transactions to the company.

Reasons and Legal Basis:

1. The penalized party stated in his comments that while serving as a fund manager for Cathay SIT, he leaked information obtained through his position to Zhang [Omitted], and during the period of trading individual stocks in the fund account, utilized Zhang [Omitted]'s account to buy and sell the same individual stocks, without reporting the transactions to the company. This constitutes a violation of Article 77, Paragraphs 1 and 2 of the SITA Act, and Article 13, Paragraph 2, Item 1, Article 14, Paragraph 1, and Article 14, Paragraph 2 of the Regulations Governing the Management of Heads and Business Personnel of Securities Investment Trust Enterprises.

2. While holding the aforementioned position at Cathay SIT, the penalized party was a person entrusted by Cathay SIT to handle affairs. Upon employment, he signed a declaration of compliance with personal trading regulations, and annually declared no personal transactions and affirmed the honesty of his declarations. Despite being fully aware of the provisions of Article 77 of the SITA Act, and Article 13, Paragraph 2, Item 1, Article 14, Paragraph 1, and Article 14, Paragraph 2 of the Regulations Governing the Management of Heads and Business Personnel of Securities Investment Trust Enterprises, he deliberately evaded the company's mechanism for checking employee transactions, utilizing another person's account to trade the same individual stocks as those in the fund account managed by him at Cathay SIT. This violated the aforementioned regulations on avoiding conflicts of interest and constituted an act contrary to his duties. It is determined that he failed to perform his duties with the duty of care of a good manager, the duty of loyalty, and the principle of good faith, violating Article 7, Paragraph 1 of the SITA Act.

3. In summary, the penalized party's violations were sufficient to affect the normal execution of business. Therefore, this case is penalized as stated in the Subject section pursuant to Article 104 of the SITA Act.

Notes: If the penalized party disagrees with this decision, they must, within 30 days from the day following the service of this decision, prepare an appeal petition pursuant to Article 58, Paragraph 1 of the Administrative Appeal Act, and submit it through this Commission (18th Floor, No. 7, Section 2, Xianmin Avenue, Banqiao District, New Taipei City) to the Executive Yuan for administrative appeal. However, pursuant to Article 93, Paragraph 1 of the Administrative Appeal Act, unless otherwise provided by law, the filing of an appeal does not suspend the execution of this decision.

Original: Li [Omitted], Cathay Securities Investment Trust Co., Ltd. (Representative: Mr. Zhang [Omitted]) Copy: Securities Investment Trust and Advisory Business Association of the Republic of China (Representative: Mr. Liu [Omitted])

Page Views: 44351 Last Updated: 2025-03-25

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