An initial investigation indicated that the firm's management may have identified the problem earlier, but concealed it from both clients and the commission. Noting that the firm has failed in its internal controls, and that client assets are at risk, the commission took action to preserve the assets of the company and its clients, and to protect the interests of these clients and the investing public.

The restriction notice bans Man Lung Hong from carrying on all activities for which it is licensed, disposing of or dealing with any assets held by it or held on behalf of its clients, and assisting, counselling or procuring another person to dispose of or deal with any such property without the Commission's prior written consent.

The Commission will continue its probe to determine what further regulatory actions may be necessary.

Meanwhile, the Stock Exchange has suspended Man Lung Hong's right to access the 3rd Generation Automatic Order Matching & Execution System until further notice. The Hong Kong Securities Clearing Company declared Man Lung Hong a defaulter and will effect closing-out of the firm's unsettled stock positions.