Hong Kong's Securities And Futures Commission Bans And Fines Lam Chun Yin And Yeung Chok Cheong

The Securities and Futures Commission (SFC) has banned and fined two former representatives of United Simsen Securities Limited (United Simsen), for failing to take all reasonable steps to avoid conflicts of interest, and for trading ahead of and on the basis of non-public information about a pending share acquisition of a client (Notes 1 & 2).

Mr Lam Chun Yin, former responsible officer of United Simsen, is banned from re-entering the industry for 36 months from 10 August 2016 to 9 August 2019 and Mr Yeung Chok Cheong, his subordinate, is banned from re-entering the industry for 30 months from 10 August 2016 to 9 February 2019. In addition, Lam and Yeung are fined $111,000 and $51,830 respectively, which are the profit each of them made from trading shares of Renhe Commercial Holdings Co., Ltd. (Renhe) on 31 December 2013.

At the material time, United Simsen was engaged by Pacific Plywood Holdings Limited (Pacific Plywood) to provide corporate advisory services. Lam and Yeung were responsible for preparing a draft announcement for Pacific Plywood on its acquisition of 80 million Renhe shares on 31 December 2013. 

In the morning of 31 December 2013, Lam and Yeung purchased a total of 1.2 million and 392,000 Renhe shares respectively before Pacific Plywood placed its order with United Simsen to buy 80 million Renhe shares. Lam and Yeung sold their Renhe shares during and shortly after Pacific Plywood’s acquisition of the Renhe shares.

Lam’s and Yeung’s conduct fell short of the standard set out in the Code of Conduct and the Corporate Finance Adviser Code of Conduct, and cast doubts on their fitness and properness to be a licensed person (Note 3). 

In deciding the sanction, the SFC took into account all relevant circumstances, including that both Lam and Yeung had no previous disciplinary record with the SFC. 

Notes:

1. Both Lam and Yeung were licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities and were accredited to United Simsen Securities Limited until April 2014. Neither of them are currently licensed by the SFC.
2. United Simsen is now known as Huarong International Securities Limited.
3. General Principle 2 (diligence) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) provides that a licensed person should act with due skill, care and diligence in conducting business activities. In addition, General Principal 6 (conflicts of interest) of the Code of Conduct and paragraph 4 of the Corporate Finance Adviser Code of Conduct provide that a corporate finance adviser/licensed person should try to avoid conflicts of interest.