Hong Kong's Securities And Futures Commission: Broker And Client Found Guilty Of Market Manipulation

The Eastern Magistrates Court today found a broker, Mr Chan Yuk Hing, and his client, Mr Paul Frederic Chane Yin, guilty of market manipulation in shares of Multifield International Holdings Limited (Multifield) in 2009. 

The Court adjourned the sentencing of Chan and Chane until 13 July 2012 pending their probation and community service order reports. They are liable to a fine of up to $1 million and/or imprisonment for three years.

An SFC investigation found that through Chan, Chane purchased 50,000 Multifield shares at an average price of $0.2261 in the morning trading session on 23 November 2009. Shortly after the afternoon session started, Chan asked Chane to buy Multifield shares at the best ask price, which was then $1.00 per share, four times the prevailing market price of $0.25 and suggested Chane to buy a single board lot of 2,000 shares. Chane agreed. As a result, the price of Multifield shares rose four-fold to $1.00. 

Shortly before trading closed that day, Chane sold the 50,000 shares he had earlier bought at an average price of $0.2261 for an average selling price of $0.4258. 

The Court agreed with the SFC’s allegation that there was no economically sensible reason for Chane to buy a single board lot at a price four times of the prevailing market price. 

The Court also found that Chan and Chane, both intended to create a false or misleading appearance of the price for Multifield shares so Chane could later sell his shares at an artificially inflated price. 

Notes:
1. Chan was a licensed representative of KGI Asia Limited at the relevant time.
2. A board lot is the minimum order quantity of shares of a stock that may be bought on a stock exchange.