Hong Kong's Securities And Futures Commission Bans Wong Lap Yin For Three Years

The Securities and Futures Commission (SFC) has prohibited Mr Wong Lap Yin from re-entering the industry for three years from 29 July 2016 to 28 July 2019 (Note 1).

An SFC investigation found that on 30 May 2012, Wong placed a series of unauthorized bid orders for the shares of China Nonferrous Metals Company Limited (CNFM) shares via a client’s (Client A) account. Each of these orders was placed at a price higher than CNFM’s nominal price and the orders matched exactly with the prevailing best ask price and quantity such that they were executed as soon as they were entered into the market.

As a result, the share price of CNFM was artificially raised by 37.3 per cent from $0.075 to $0.103.

At around the same time, Wong carried out a cross-trade to transfer about 5 million CNFM shares at the price of $0.105 from the personal account of another client (Client B) to a joint account held by Client B and his wife (the Joint Account).

The SFC found that Wong’s purpose in pushing up the share price of CNFM (through the trades in Client A’s account) was to facilitate the subsequent cross-trade between Client B’s personal account and the Joint Account at a higher price to eliminate the debit cash balance in Client B’s personal account (Note 2).

The SFC considers that Wong’s conduct was not only unfair to Client A, but was also unfair to other investors because it interfered with the impartiality and objectivity of the normal process of price formation, and might have affected the trading strategy and investment decision of other market participants (Note 3).

In deciding the penalty, the SFC took into account all relevant circumstances, including that:

• Wong’s conduct has caused financial loss to Client A;
• a strong message needs to be sent to the market that Wong’s conduct is unfair and could jeopardise market integrity and undermine market confidence;
• Wong, who has been in the securities industry for about 15 years, should have known that the manner in which he placed the orders could have the effect of artificially raising the nominal price of the shares; and
• Wong has no previous disciplinary record.

Notes:

1. Wong was licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. Wong was accredited to Phillip Securities (Hong Kong) Limited, Phillip Commodities (HK) Limited and Phillip Capital Management (HK) Limited until 27 September 2012. He is currently not licensed by the SFC.
2. Under Rule 526(3) of the Trading Rules of the Hong Kong Stock Exchange, the price set for direct business cannot be higher than the best offer in the market. Orders are matched on a strict price and time priority basis, so if Wong had not cleared the ask orders at lower price queues first using Client A’s account, the cross-trade could not have been carried out at $0.105.
3. General Principle 1 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission requires licensed persons to act honestly, fairly and in the best interests of their clients and the integrity of the market.