The Financial Supervisory Commission (FSC) is investigating whether Hua Nan Securities Co (華南永昌證券) had problematic internal controls regarding its investments and might impose a fine if it did, commission Chairman Wellington Koo (顧立雄) said yesterday.
“It seems that the securities firm did not stick to its hedging strategy and thus suffered greater risk exposure than its risk appetite line,” Koo told a meeting of the legislature’s Finance Committee in Taipei.
The commission has asked the securities arm of state-run Hua Nan Financial Holding Co (華南金控) to submit supplementary information after receiving the firm’s review report, Koo said.
The commission would address the matter based on the Securities and Exchange Act (證交法), which allows the regulator to dismiss the securities firm’s board of directors, supervisors or management team, suspend its operations or impose a fine of up to NT$4.8 million (US$159,363), he said.
Hua Nan Securities on March 24 reported losses of NT$3.4 billion as a result of unsuccessful transactions of derivative warrants.
The figure increased to NT$4.75 billion for the whole of last month, it said in a filing with the Taiwan Stock Exchange last week.
As a result, Hua Nan Financial reported a net loss of NT$3.59 billion for the month, its first loss since December 2010, Democratic Progressive Party Legislator Chiang Yung-chang (江永昌) said.
Hua Nan Financial president Derek Chang (張雲鵬) last week said at a meeting at the Legislative Yuan that its subsidiary made three mistakes: selling more derivative warrants than its risk appetite allowed, selling them at the wrong time and paying too much in hedging costs.
The unit made a wrong hedging move against the local equity market again when the TAIEX rebounded late last month, causing its losses to grow, he said.
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