HONG KONG: SFC warning against Hong Kong short selling of shares

Thursday August 1 2013

Following recent market investigations, the Securities and Futures Commission of Hong Kong (SFC) has today issued a warning concerning the premature selling of shares. This, according to the SFC, may constitute illegal Hong Kong short selling and lead to criminal prosecution. The SFC has emphasised that that placing shares will remain conditional until completion of a placement.

Under the Securities and Futures Ordinance (SFO), a person shall not sell securities at or through a recognized stock market unless at the time he sells them:

• he has or, where he is selling as an agent, his principal has; or
• he believes and has reasonable grounds to believe that he has or, where he is selling as an agent, that this principal has,

a presently exercisable and unconditional right to vest the securities in the purchaser of them.

It follows that anyone who sells these conditional placing shares before completion of a placement runs the risk of committing illegal short selling, contrary to the SFO, unless the person (or where the person is selling as an agent, his principal has) already held a sufficient number of shares to settle the trade.

Please click on the above link for the SFC press release.