Stock Exchange of Hong Kong Action against Chan Yuen Yee

The Securities and Futures Commission ("SFC") and The Stock Exchange of Hong Kong Limited ("the Exchange") jointly announce today (Tuesday) that they have taken action against Ms Chan Yuen Yee ("Ms Chan") trading as Tai Shing Stock Investment Company, a securities dealer and a Member of the Exchange. This action stemmed from an investigation by the SFC during 1993 to 1995 which revealed that: Ms Chan's dealer's representatives used various nominee accounts at Ms Chan's business to conduct trading malpractices and short selling; the dealer's representatives of other brokerages used various nominee accounts at Ms Chan's business to conduct trading malpractices; Ms Chan's dealer's representatives facilitated trading malpractices conducted by dealer's representatives of other brokerages; and Ms Chan did not establish and maintain proper procedures in respect of dealing practices, record keeping, monitoring staff dealing, monitoring compliance with legal requirements relating to short selling, monitoring manual cross trades, ensuring registration of staff, ensuring the maintenance of proper account opening procedures and handling the movement of client assets. The SFC's investigation found that Ms Chan was aware of the above trading malpractices and short selling activities and had facilitated these improper activities by signing settlement cheques in such a way as to allow the payee of the cheques to be altered, thereby facilitating the diversion of funds to dealer's representatives and others. As a result, the SFC has decided to publicly reprimand Ms Chan. In addition, the Disciplinary Committee of the Exchange ("the Disciplinary Committee") has decided to impose a penalty of public censure plus a fine of HK$40,000 on Ms Chan. In deciding on this course of action, the SFC and the Disciplinary Committee took into account that Ms Chan: had incorporated her business as Tai Shing Stock Investment Company Limited; will voluntarily surrender her registration as a securities dealer for a period of three years effective from June 30, 1999; had appointed, on a full-time basis, a person acceptable to the SFC and the Exchange to be a Dealing Director of Tai Shing Stock Investment Company Limited's business; had taken effective measures to address the shortcomings in the business' operations as a result of various inspections by the SFC and the Exchange from 1995 to 1998; and had agreed to engage an independent firm of accountants acceptable to the SFC and the Exchange to perform a review of the business' systems and internal control procedures and to fully implement all recommendations that may be made in that report. To date, the SFC has already taken action against six registered persons who have been involved in short selling or trading malpractices through nominee accounts held with Ms Chan or in facilitating these activities. A copy of the Notice of Public Censure published by the Exchange is attached for your reference. For further information, please contact Ms Susanne Ho of the SFC at 2840-9470 or Ms Cherry Pu of the SFC at 2840-9289 or Mr Henry Law of the Exchange at 2840-3862.