SFC Regulatory Newsletter 2024 Vol. 11

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As we enter the month of November, we find ourselves in a period of transition. November marks the occasion of the 60th U.S. presidential election, during which the nation has been selected its 47th president. The return of former President Donald Trump to the forefront of politics has resulted in an outcome that has garnered considerable attention both domestically and internationally. This month ushers in significant political developments that will undoubtedly shape our future. We are reminded of the critical importance of maintaining compliance and staying informed in our rapidly evolving landscape. We remain dedicated to providing you with the insights and support necessary to navigate these changes effectively.

Circular to licensed corporations engaged in asset management business Deficiencies and substandard conduct noted in the management of private funds and discretionary accounts
9 October 2024

The Securities and Futures Commission (SFC) has identified various deficiencies and substandard conduct during its supervision of licensed corporations engaged in managing private funds and discretionary accounts (asset managers). These deficiencies and substandard conduct pose significant risks to the assets under their management, and are in breach of their obligations under the SFC’s Code of Conduct, FMCC and Internal Control Guidelines.

Concerns due to breaches of regulatory requirements identified by the SFC are summarized below:-

Senior management responsibilities and potential regulatory action

The board and senior management of asset managers, including the Managers-In-Charge of Core Functions and Responsible Officers, bear primary responsibility for ensuring the maintenance of appropriate standards of conduct. Where practicable, an independent and objective audit should be conducted on the asset manager’s compliance with the existing obligations discussed in this circular. Should an asset manager become aware of any material breach, infringement or non-compliance with any regulatory requirements in its review, it should report to the SFC immediately, while providing particulars of the breach as well as relevant information and documents as required under paragraph 12.5 of the Code of Conduct. The asset manager’s initiative to self-report any breaches of regulatory requirements identified will be taken into consideration during the process of determining any potential disciplinary action against it by the SFC.

it will commence a thematic on-site inspection of asset managers managing private funds to detect any material breaches or non-compliance with applicable regulatory requirements among other issues. The SFC will not hesitate to take decisive action against these asset managers and their management, including relevant Managers-In-Charge and Responsible Officers, for their misconduct in asset management activities and failure to discharge their supervisory duties.

Regulatory concerns and existing obligations

(I) Conflicts of interest

Some asset managers failed to prevent and manage potential or actual conflicts of interests arising from their transactions or practices, such as:

(a) using fund assets to provide financing to related entities;
(b) providing financing to funds and failing to justify charging fees higher than prevailing commercial rates;
(c) unfairly allocating trades in favour of the asset manager’s key personnel;
(d) receiving monetary benefits from the funds’ transactions; and
(e) failing to act fairly in handling redemption payments to fund investors by giving priority to redemptions from its staff over those of other clients.

The transactions or practices concerned have seriously jeopardised the interests of investors and, in most cases, resulted in their substantial losses. The issue was particularly disconcerting when the conflicts of interest on the part of the asset managers were apparent. Pursuant to paragraph 1.5 of the FMCC, the SFC reminds asset managers of their duty to take all reasonable steps to identify, prevent, manage and monitor any actual or potential conflicts of interest. These steps should be documented as appropriate, and the asset managers are expected to demonstrate effective implementation of these steps upon the SFC’s request.

Where material conflicts of interest cannot be prevented, asset managers should critically consider whether it is in the best interest of the fund to conduct such transactions. The asset managers should also ensure that all transactions are conducted in good faith at arm’s length and on normal commercial terms. After complying with the above requirements, asset managers should further manage and minimise the conflicts by appropriate safeguards and measures to ensure the fair treatment of fund investors as required under paragraph 1.5 of the FMCC.

(II) Risk management and investment within mandate

Some asset managers failed to implement adequate risk management procedures or conduct appropriate investment due diligence to ensure that transactions carried out on behalf of clients were in accordance with their investment objectives and restrictions. Additionally, they did not adequately address the risks associated with the transactions. As a result, these failures exposed the investors to significant concentration, liquidity and credit risks, leading to substantial losses due to defaults by the issuers or borrowers.

Pursuant to paragraphs 3.1 and 3.11.1 of the FMCC, asset managers are expected to implement adequate risk management procedures to identify, measure, manage and monitor appropriately all risks to which the fund or account is or may be exposed, and ensure investment is made in accordance with their investment objectives, restrictions and risk profiles. Asset managers should also maintain effective record retention policies and keep proper records of their risk assessment to demonstrate compliance with all relevant legal and regulatory requirements in accordance with paragraph 5.1(a) of the FMCC and section IV.6 of the Internal Control Guidelines.

(III) Information for investors

The SFC has noted instances where asset managers failed to provide fund investors with adequate information, such as disclosures about

(a) concentrated positions and significant exposures that subject the fund to significant risk, such as the majority of the fund’s assets being exposed to a single issuer or issuers of the same group;
(b) significant events impacting the funds such as major investment losses, significant defaults in investments with substantial adverse impact on the funds’ net asset value or the funds’ ability to meet their liquidity needs; and
(c) modified opinion issued by the funds’ auditors or material delay in issuing of audited financial statements.

As required under paragraph 6.2 of the FMCC, the SFC reminds asset managers responsible for the overall operation of the funds under their management that they have a responsibility to provide fund investors with adequate information on the funds to allow them to make informed judgement about their investments into the funds.

(IV) Valuation methodologies

The SFC has noted instances where the asset managers adopted inappropriate valuation methodologies with an intention to hide investment losses of the funds under their management from investors. The SFC reminds asset managers responsible for the overall operation of the funds under their management that they have a responsibility to ensure the valuation policies and procedures adopted by the funds are appropriate, pursuant to paragraph 5.3.1 of the FMCC. In particular, asset managers should make reference to paragraph 5.3.6 of the FMCC in valuing securities that are not actively traded or have been suspended from trading (for listed securities), unless specified methodologies are stated in the funds’ constitutive documents.

Circular to management companies of SFC-authorised unit trusts and mutual funds –information disclosure on information portal of integrated fund platform
21 October 2024

The Hong Kong Exchanges and Clearing Limited (HKEX) will launch the integrated fund platform (IFP), a new financial infrastructure to expand Hong Kong’s fund distribution network, in phases from end-2024 commencing with a public-facing information portal for SFC-authorised funds (funds).

The information portal will serve public interest by providing one-stop access to fund information which is required to be made available to investors. The portal is expected to benefit the growth of the fund industry in the long run, as it helps boost investors’ interest in funds by allowing them to navigate the fund universe more easily.

Circular to applicants seeking SFC authorisation of unit trusts and mutual funds - Launch of a new Fund Authorisation Simple Track (FASTrack)
21 October 2024

The SFC currently processes new fund applications under a two-stream approach where applications are classified as standard or non-standard.

The SFC has entered into mutual recognition of funds arrangements with jurisdictions outside Hong Kong (MRF Jurisdictions)1. As the regulatory regimes of these MRF Jurisdictions provide comparable investor protection for retail investment funds to that in Hong Kong and cooperation arrangements between the SFC and home regulators are in place including the exchange of information, the SFC sees room to further expedite the authorisation process for funds from MRF Jurisdictions.

The SFC now launches a new “Fund Authorisation Simple Track” (“FASTrack” in short) for simple funds domiciled and regulated in MRF Jurisdictions that seek authorisation for public offering in Hong Kong. FASTrack aims to grant fund authorisations within 15 business days from applications if successful to promote overall fund authorisation efficiency and maintain the competitiveness of the asset management industry in Hong Kong.

Circular on full adoption of e-IP application/submission system on WINGS
24 October 2022

SFC will extend the parallel run period of its new online application/submission system for investment products, e-IP, by one month to 29 November 2024. After the extended period, applications and submissions of investment products administered by the Investment Products Division (IPD)1 must be submitted to IPD via e-IP from 30 November 2024.

Circular to management companies of SFC-authorized unit trusts and mutual funds - enhanced fund data reporting
25 October 2024

In view of international regulatory developments on fund data reporting, the SFC will refine the existing requirements for SFC-authorized funds’ (the Fund(s)) enhanced fund data reporting to enhance its ability to perform supervisory and regulatory responsibilities, with effect from 31 January 2025.

This circular supersedes the 2018 and 2021 Circulars and sets out the SFC’s requirements for enhanced fund data, covering periodic reporting of the Fund’s information in subscription and redemption, liquidity profile, asset allocation and leverage exposure and securities financing transactions and securities borrowing transactions.

Reporting forms and filing arrangements

Following the end of each report date, the SFC will send a submission request in the e-IP system on WINGS to the management company of each Fund. The request will include reporting forms, instructions on completing them and a link for submitting the completed forms to WINGS.

The management company (or its authorised entity, eg, the fund’s administrator) should complete and file the reporting forms with the SFC via WINGS within:
(a) 10 business days from the report date for subscription and redemption report; and
(b) five weeks from the report date for other types of report.

To facilitate preparation for the launch of enhanced data reporting, the SFC provide sample reporting forms which set out the fund data required to be submitted under the refined requirements. Please click “View Circular” for more details.

Fugitive ramp-and-dump core suspect arrested in Singapore and surrendered to Hong Kong to face securities fraud charge
4 October 2024

The SFC is forging ahead with its enforcement actions against ramp-and-dump schemes with another suspected core member of a highly sophisticated syndicate being charged after she was surrendered to Hong Kong following her arrest in Singapore.

Ms Chan Sin Ying, a 33-year-old Hong Kong resident, was brought to the Eastern Magistrates’ Courts today and charged with the offence of conspiracy to employ a scheme with intent to defraud or deceive in transactions involving securities under section 300 of the Securities and Futures Ordinance (SFO) and sections 159A and 159C of the Crimes Ordinance.

Chan was suspected to have conspired with Mr Stevens Yip Chi Fai, Mr Lau Ka Wing, Ms So Lung Ying and other persons in an alleged ramp-and-dump scheme involving the shares of Wan Cheng Metal Packaging Company Limited. Yip, Lau and So were previously charged with the same offence as Chan and the proceedings against them are ongoing in the District Court.

Chan left Hong Kong one day after the SFC conducted a search operation at her residence on 9 November 2022 and has become uncontactable since then. Upon the application by the SFC, a magistrate issued an arrest warrant against her. She was also named in the Red Notice of the International Criminal Police Organization (INTERPOL).

After further investigation, the SFC discovered that Chan was in Singapore. The Singapore Police Force arrested her on 18 July 2024 upon the application of the Department of Justice of Hong Kong to the Attorney-General’s Chambers of Singapore. She was remanded in custody by a Court in Singapore and was surrendered to Hong Kong yesterday.

This is the first time the SFC has sought the assistance from other relevant authorities in naming a fugitive offender on the INTERPOL Red Notice and surrendering a fugitive offender wanted for prosecution for an offence under the SFO.

Chan was surrendered from Singapore to Hong Kong yesterday. No plea was taken at today’s Court hearing. Chan’s bail application was rejected by the Court and she was ordered to be remanded in custody. The case was adjourned to 10 October 2024 for bail review and 8 November 2024 for the application of case transfer to the District Court.

SFC reprimands and fines CSC Futures (HK) Limited $4.95 million for regulatory breaches
9 October 2024

The SFC has reprimanded and fined CSC Futures (HK) Limited (CSC) $4.95 million for failures in complying with anti-money laundering and counter-financing of terrorism (AML/CFT) and other regulatory requirements between January 2017 and December 2018.

The SFC’s investigation found that CSC did not conduct any due diligence on the customer supplied systems (CSSs) used by 100 clients for placing orders during the material time. As a result, CSC was not in a position to properly assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSSs by its clients.

In addition, the SFC identified that the amounts of deposits made into five client accounts were incommensurate with their declared financial profiles. As a result of its failure to maintain an effective monitoring system, CSC failed to detect, assess and conduct proper enquiries on the deposits and satisfactorily address the associated ML/TF risks.

The SFC is of the view that CSC’s systems and controls were inadequate and ineffective, and CSC failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the AML Guideline and the Code of Conduct.

In deciding the disciplinary sanctions against CSC, the SFC has taken into account that:

CSC’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market;
a strong deterrent message needs to be sent to the market that such failures are not acceptable;
there has been a change in CSC’s senior management after the relevant period;
CSC cooperated with the SFC in resolving the SFC’s concerns; and
CSC’s otherwise clean disciplinary record.

SFC reprimands and fines Xinhu International Futures (Hong Kong) Co., Limited $9 million and suspends its former responsible officer Ngai Wai for nine months
9 October 2024

The SFC has reprimanded and fined Xinhu International Futures (Hong Kong) Co., Limited (Xinhu) $9 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between December 2016 and March 2019.

The SFC has also suspended the licence of Mr Ngai Wai, Xinhu’s former responsible officer and manager-in-charge (MIC) for overall management oversight, compliance, information technology and risk management for nine months from 8 October 2024 to 7 July 2025. This is because Xinhu’s failures were attributable to Ngai’s failure to discharge his duties as a responsible officer and a member of the senior management of Xinhu during the material time.

The SFC’s investigation found that Xinhu did not conduct any due diligence on the customer supplied system (CSS) used by 84 clients for placing orders. As a result, Xinhu was not in a position to properly assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSS by its clients.

In addition, the SFC identified that the amounts of deposits made into six client accounts were incommensurate with their declared financial profiles. Although Xinhu claimed that its staff had followed up with these clients on the suspicious or unusual deposits made into their accounts, it failed to demonstrate that it had conducted proper enquiries on the deposits and satisfactorily addressed the associated ML/TF risks. The SFC found that Xinhu had failed to implement adequate systems and controls to monitor and assess large, unusual or suspicious fund deposits made by its clients into their accounts.

The SFC further found that Xinhu’s failure to put in place an effective ongoing monitoring system to detect suspicious trading patterns in client accounts resulted in its failure to detect 12,413 self-matched trades in 10 client accounts.

The SFC is of the view that Xinhu’s systems and controls were inadequate and ineffective, and failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML Guideline) and the Code of Conduct.

In deciding the disciplinary sanctions, the SFC has taken into account all relevant circumstances, including:

Xinhu’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market;
a strong deterrent message needs to be sent to the market that such failures are not acceptable;
Xinhu and Ngai cooperated with the SFC in resolving the SFC’s concerns; and
Xinhu and Ngai have otherwise clean disciplinary records with the SFC.

Court sets next hearing date for insider dealing case against Segantii Capital Management and its chief investment officer
15 Oct 2024

The District Court today adjourned to 19 December 2024 for mention the insider dealing case against Segantii Capital Management Limited, its director and chief investment officer Mr Simon Sadler, and former trader Mr Daniel La Rocca. No plea was taken from the defendants at today’s hearing.

The proceedings were commenced by the SFC. The three defendants are charged with the offence of insider dealing in the shares of a listed company prior to entering into a block trade in June 2017 in the shares of the same listed company.

Sadler and La Rocca were released on bail pending the next hearing on the same conditions: (i) cash bail of $1,000,000 and $500,000 respectively; (ii) they shall inform the SFC 24 hours before leaving Hong Kong, and to provide the SFC with full itinerary with contact details; (iii) they shall reside at the home address provided to the SFC and inform the SFC 48 hours in advance of any change of address and/or contact details whilst abroad; and (iv) they shall not contact either directly or indirectly any prosecution witnesses.

SFC reprimands and fines Zheshang International Financial Holdings Co., Limited $2.66 million for regulatory breaches
15 Oct 2024

The SFC has reprimanded and fined Zheshang International Financial Holdings Co., Limited (Zheshang) $2.66 million for failures in complying with anti-money laundering and counter-financing of terrorism (AML/CFT) and other regulatory requirements between June 2016 and October 2018 (Relevant Period).

The SFC’s investigation found that Zheshang failed to put in place an effective ongoing monitoring system to detect and assess suspicious trading patterns in client accounts, which resulted in its failure to detect the majority of the 23,370 self-matched trades that occurred in three client accounts during the Relevant Period.

In addition, the SFC identified that the amounts of deposits made into two client accounts were incommensurate with their declared financial profiles. Although Zheshang claimed to have made enquiries with the clients, it did not keep record of such enquiries.

The SFC is of the view that Zheshang’s systems and controls were inadequate and ineffective, and Zheshang failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the AML Guideline and the Code of Conduct.

In deciding the disciplinary sanctions against Zheshang, the SFC has taken into account that:

Zheshang’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market;
a strong deterrent message needs to be sent to the market that such failures are not acceptable;
Zheshang’s cooperation in resolving the SFC’s concerns, including its agreement to engage an independent reviewer to review its internal controls; and
Zheshang has an otherwise clean disciplinary record.

SFC commences MMT proceedings against Dickson Poon over alleged insider dealing and Dickson Concepts as well as its senior executives for late disclosure of inside information
15 Oct 2024

The SFC has commenced proceedings in the Market Misconduct Tribunal (MMT) against chairman of Dickson Concepts (International) Limited (Dickson Concepts), Mr Dickson Poon, and Equity Advantage Limited (Equity) for alleged insider dealing in the shares of Dickson Concepts.

The SFC also alleges that Dickson Poon and his son Mr Dickson Pearson Guanda Poon (Pearson Poon), an executive director of Dickson Concepts, caused the company’s breach of the disclosure of inside information requirements, resulting in a seven-week delay in its disclosure.

On 20 November 2019, Paypal Holdings, Inc. (Paypal) announced on its website that it had agreed to acquire Honey Science Corporation (Honey) for approximately US$4 billion (proposed acquisition). At the material time, Dickson Concepts held 24,834,600 shares of Honey, being approximately 3.73% of Honey’s issued share capital (investment). In Dickson Concepts’ financial statements, the investment was booked as “Unlisted equity securities” under “Other Financial Assets”, without any reference to Honey.

On 9 January 2020, Dickson Concepts issued an announcement disclosing to the public, among other things, that Paypal and Honey had completed the proposed acquisition on 3 January 2020. As a result, Dickson Concepts would receive US$147,585,708, or approximately HK$1,149,545,080 in cash as proceeds from its disposal of the Investment, which would be a gain of approximately HK$928,744,921 over Dickson Concepts’ net book value of the Investment as at 30 September 2019. On 10 January 2020, the price of Dickson Concepts shares reached an intra-day high of HK$5.52 per share and closed at HK$5.00 per share, representing an increase of 33.3% from the pre-suspension close.

The SFC alleges that while Dickson Poon was in possession of inside information about the proposed acquisition, he purchased a total of 2,756,500 shares of Dickson Concepts via the securities account of Equity between 28 November and 19 December 2019.

The SFC also alleges that Dickson Concepts failed to disclose inside information about the proposed acquisition as soon as reasonably practicable; Dickson Poon and Pearson Poon caused Dickson Concepts’ breach of the disclosure of inside information requirements, and that they failed to take all reasonable measures to ensure that proper safeguards exist to prevent such breach.

The SFC alleges that Dickson Poon and Pearson Poon, who were members of senior management of Dickson Concepts, became aware of the inside information about the proposed acquisition on 21 November 2019. However, they failed to take steps to cause the Board of Dickson Concepts to disclose the inside information to the public as soon as reasonably practicable and Dickson Concepts only issued the announcement seven weeks later on 9 January 2020.

SFC suspends Singh Amit Kishan for seven months
18 Oct 2024

The SFC has suspended Mr Singh Amit Kishan, a former employee of Bank Julius Baer & Co. Ltd. (Julius Baer), for seven months from 16 October 2024 to 15 May 2025 for regulatory breaches.

The disciplinary action follows an SFC investigation which found that between 17 December 2018 and 11 February 2019, Singh, a private banker of Julius Baer, misrepresented to his then employer that he had a face-to-face meeting with a client on 10 December 2018 in Hong Kong as part of the required account opening procedure.

He also advised the client through text messaging to make 14 transactions between 21 June 2019 and 20 February 2020 in a manner which created a false appearance of unsolicited trades when that was not the case. As a matter of fact, 11 transactions involved products which were not allowed for solicitation under Julius Baer’s then applicable policies, and they would not have been allowed to proceed in the circumstances. The rest would have required pre-trade approval due to concentration risks had they been solicited, which Singh did not obtain.

All in all, Singh circumvented Julius Baer’s procedures on account opening, know-your-client (KYC) and product suitability. As a result, Julius Baer was prevented from properly monitoring staff conduct in these areas and its resulting compliance with the applicable KYC and suitability requirements under the Code of Conduct.

In deciding the sanction against Singh, the SFC has taken into account all relevant circumstances, including:

• there is no evidence to suggest that the substantive personal information and risk profile of the client contained in the account opening documents were materially deficient or misleading or that the products traded in the 14 transactions were unsuitable for the client; and
• his otherwise clean disciplinary record

SFC obtains disqualification order against former chief financial officer of Fujian Nuoqi Co., Ltd.
18 Oct 2024

The SFC has obtained a disqualification order in the Court of First Instance against Mr Au Yeung Ho Yin, the former chief financial officer (CFO) and executive director of Fujian Nuoqi Co., Ltd. (Nuoqi) for his failure to discharge his duties as a member of the senior management of Nuoqi.

Au Yeung was disqualified from being a director, liquidator, receiver or manager of the property or business of any corporation in Hong Kong or being involved in the management of any corporation in Hong Kong, for a period of three years (Note 5). He was also ordered to pay the SFC’s costs in the proceedings.

The disqualification order was made after Au Yeung admitted his failure to discharge his duties to oversee the accounting and finance functions of Nuoqi, advise and assist the board of directors of Nuoqi, and supervise the preparation of Nuoqi’s accounts and financial reports and ensure proper corporate governance.

The SFC’s investigation revealed that approximately RMB225 million, approximately 95% of the net proceeds of RMB236.52 million from Nuoqi’s global offering of its shares (IPO proceeds), was withdrawn on multiple instances from Nuoqi’s bank accounts by the company’s former chairman. The withdrawals, which took place shortly after listing of Nuoqi shares in January 2014, were made without proper approval by Nuoqi’s board of directors and did not serve any genuine commercial purpose.

Justice Peter Ng of the Court of First Instance remarked that Au Yeung has breached his duties as CFO by failing to investigate the transfers of RMB50 million and HK$19.55 million, representing a portion of the unauthorized withdrawals totalling RMB225 million, for certain alleged acquisitions which were outside the scope specified in Nuoqi’s listing prospectus for its global offering of shares (Note 6). He also failed to discharge his duties as an executive director of Nuoqi to alert his fellow directors about the transfers. Furthermore, he inserted a paragraph in Nuoqi’s 2013 annual report stating that the unused IPO proceeds were deposited in Hong Kong licensed banks and would be used as outlined in the listing prospectus. This statement was false or misleading because RMB160 million out of the net IPO proceeds of RMB236.52 million was transferred to a Mainland bank and was not used within the scope specified in the listing prospectus.

First court hearing on alleged share options fraud case
25 Oct 2024

Mr Tsang Chung Yu, a former independent non-executive director of Metaverse Yunji Technology Group Company Limited (Metaverse Yunji) and 11 other individuals were charged today in a fraud case involving the granting of share options following the joint operation of the Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC) in January 2024.

Tsang and the others, appearing in the Eastern Magistracy for mention today, were charged for conspiracy to defraud by the ICAC, with an alternative charge of conspiracy to deal with property known or believed to represent proceeds of an indictable offence. The total amount of suspected crime proceeds handled by them was approximately $4.35 million.

Tsang allegedly conspired with others to defraud Metaverse Yunji between April and September 2022 by falsely representing that 10 of the 11 individuals were employees of the company, thereby inducing the company to grant 66 million share options to them.

The SFC will continue to collaborate with the ICAC on this matter.

SFC obtains court order to freeze $6.35 billion of assets belonging to suspected manipulators of Ding Yi Feng shares
25 Oct 2024

The Court of First Instance has granted an interim injunction order against 11 suspected manipulators of shares of Ding Yi Feng Holdings Group International Limited (Ding Yi Feng) in proceedings brought by the Securities and Futures Commission (SFC) under section 213 of the Securities and Futures Ordinance (SFO).

Pursuant to the Court order, the 11 suspected manipulators, who allegedly manipulated Ding Yi Feng shares between 1 March and 14 September 2018, are prohibited from (i) removing any of their assets which are within Hong Kong, or (ii) in any way disposing of or dealing with or diminishing the value of any of their assets which are within Hong Kong, up to the value of $6,353,386,915. The interim injunction order ensures that there are sufficient assets to meet the restoration orders sought by the SFC, if the Court finds the suspected manipulators in contravention of the relevant provisions of the SFO.

The interim injunction order remains in effect until further order of the Court.

First immediate jail sentence for convicted unlicensed activity with a compensation order
30 Oct 2024

The Eastern Magistrates’ Court today sentenced Ms Lai Ka Yi to two weeks’ imprisonment and ordered her to pay a sum of $98,000 as compensation to a victim of her unlicensed activity after she was convicted of holding herself out as carrying on a business in dealing in securities without a licence from the Securities and Futures Commission (SFC).

This is the first time the Court has imposed an immediate jail sentence for an unlicensed activity offence under section 114 of the SFO with a compensation order in a prosecution brought by the SFC (Notes 1 and 2). Lai was also ordered to pay the SFC’s investigation costs.

The Court heard that between April and 10 May 2018, Lai who was then a university student, held herself out to the victim, who she knew personally, as carrying on a business in dealing in securities. Lai enticed the victim to transfer to her bank account funds for her to invest in securities on the victim’s behalf (Note 3). In the end, the victim was unable to withdraw the investment from Lai except receiving from her $2,000 in purported earnings.

Lai, who will appeal against both conviction and sentence, has been granted bail pending her appeal.

The SFC reminds the investing public to check the SFC’s Public Register of Licensed Persons and Registered Institutions on the SFC’s website (www.sfc.hk) to ensure that firms and individuals who provide dealing services in securities are properly licensed.