along the Hong Kong island side of Victoria Harbour (C)
A view along the Hong Kong island side of Victoria Harbour (C) in the Central district. ANTHONY WALLACE/Getty Images

A Hong Kong brokerage papered over a shortfall in its books for the better part of two years using a simple trick: deposit a cheque, count it as cash, then let it bounce a few days later — after the paperwork had already gone to the regulator.

Hong Kong's Securities and Futures Commission has revoked the licence of Ernest Chan Tsz Kin, a former responsible officer at Keptain Securities and Asset Management Ltd, and banned him from the industry for 10 years, running from August 24, 2026, to August 23, 2036. The SFC found Chan caused Keptain to window dress its liquid capital and file false or misleading information in 15 monthly financial returns between June 2016 and March 2018.

How the scheme worked

Licensed brokerages in Hong Kong must hold a minimum level of liquid capital and report it to the SFC every month. In each of the 15 returns Chan signed and submitted, Keptain reported liquid capital above the required threshold. The regulator found that number relied on 15 cheques issued by Chan or companies connected to him, deposited into Keptain's account around month-end and then dishonoured within days — after the return had already been filed.

Strip those cheques out, the SFC said, and Keptain would have missed the liquid capital requirement at the end of every one of those 20 months, with shortfalls ranging from HK$731,000 to HK$3.47 million. Firms are required to flag a capital deficit to the SFC as soon as it happens. Keptain never did.

A shell with nothing to protect

What makes the case unusual is what Keptain wasn't doing at the time: the SFC noted the firm had no active clients and wasn't conducting any regulated business during the entire period the scheme ran. There was no investor money on the line — just a licence the firm apparently wanted to keep alive on paper.

The SFC said the conduct happened with Chan's consent or connivance, calling it deliberate and a serious breach of the rules that exist specifically so the regulator can verify a firm's financial soundness. In weighing the sanction, the SFC also credited Chan's cooperation in resolving its concerns.

No independent public statement from Chan or a representative could be located beyond the cooperation the SFC credited him with in its decision.

Why it matters

Liquid capital rules are one of the few early-warning systems Hong Kong's regulator has for catching a brokerage in trouble before clients get hurt. A scheme built to defeat that check for 20 straight months — undetected until the SFC's own investigation caught it — is a reminder of how much depends on self-reported numbers holding up to scrutiny. Chan is now barred from re-entering Hong Kong's securities industry until 2036.