HONG KONG: Retail Investors Convicted of Illegal Short Selling

On 27th April 2017, the Eastern Magistrates’ Court convicted Mr Cheng Chi Fei and Mr Wong Kin after they pleaded guilty to illegal short selling in the shares of China Agri-Products Exchange Limited (China Agri-Products).

The Court fined Cheng and Wong a total of HK $16,000.

In March 2014, Cheng and Wong applied for rights shares of China Agri-Products. On 21 March 2014, before the rights issue became unconditional and the result of the allotment of rights shares was announced, Cheng illegally sold 2,967,999 China Agri-Products rights shares, whilst Wong sold 5,494,984 of the same through his friend’s account illegally in the capacity of an authorized person.

By short-selling the above rights shares, Cheng and Wong contravened section 170 of the Securities and Futures Ordinance (SFO). Section 170 (1) of the SFO prohibits the sale of securities when a person does not have a presently exercisable and unconditional right to sell them.

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