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BCSC panel finds that self-employed “Forex” trader committed fraud

  • Date:

    2015-05-07
  • Number:

    2015/40

Vancouver – A British Columbia Securities Commission panel has found that Hong Liang Zhong committed fraud, engaged in unregistered trading, and offered clients false guarantees to reimburse them for any losses.

Zhong recruited people to open Forex accounts over which he was given trading authority. In its decision, the panel found that Zhong was engaged in trading in securities on behalf of his clients without being registered (Zhong has never been registered to sell securities in B.C.).

The panel also found that Zhong guaranteed at least four of the Forex clients that he would return their full principal if they suffered trading losses. This type of guarantee is a contravention of the Securities Act. These clients invested USD $115,062, and Zhong lost USD $102,721 of their money. Zhong has not reimbursed them for their losses.

Further, the panel found that Zhong perpetrated a fraud by misrepresenting the true nature of his commissions for Forex trading to investors (Zhong failed to inform the investors that he would receive a commission based on the volume traded).

Discussing Zhong’s misconduct, the panel wrote:

“Zhong was an experienced forex broker and trader. He would have known, from his dealings with the forex firms and their requirements, that transaction-based commissions create a conflict of interest and that guarantees were not permitted by the Forex firms because of their questionable value. He would have known that in hiding these facts from the investors, he deprived them of the ability to make proper risk assessments, thereby putting their pecuniary interests at risk.”

In its decision, the panel declined to make separate findings of fraud with respect to the Forex firms involved.

The panel directed the parties to make submissions on sanctions according to the schedule set out in the findings.

You may view the findings decision on our website www.bcsc.bc.ca by typing Hong Liang Zhong or 2015 BCSECCOM 165 in the search box. Information regarding disciplinary proceedings can be found in the Enforcement section of the BCSC website.

Please visit the Canadian Securities Administrators’ Disciplined Persons List for information relating to persons disciplined by provincial securities regulators, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA).

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

  • A securities market that is fair and warrants public confidence
  • A dynamic and competitive securities industry that provides investment opportunities and access to capital

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