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The Eastern Magistrates’ Court today convicted a retail investor, Mr Au Wai Lok, of six counts of false trading in the shares of Xi’an Haitian Antenna Technologies Limited (Xi’an Haitian) after he pleaded guilty.
The court adjourned sentencing to 26 August 2013 pending a report on the suitability of community service order. Au was ordered to pay the Securities and Futures Commission’s (SFC) investigation costs, and placed on bail pending sentencing.
An SFC investigation found that, between 24 and 31 May 2010, Au placed orders via his and his father’s securities accounts for Xi’an Haitian shares within 90 seconds of market close. The orders were to buy single board lots at prices just below the prevailing best ask price (Note 1). The orders raised Xi’an Haitian’s nominal share price. Although none of the orders were filled, they raised the closing price of Xi’an Haitian by 7.7% to 12%.
The SFC alleged that the orders were not economically rational considering the relatively high transaction costs having regard to the small value of the trades nor consistent with Au’s trading pattern since he was not accustomed to trading at the size of a single board lot or at a small transaction value. The orders were intended to create a false or misleading impression of the share price.
The court also heard that, on 10 May 2010, Au simultaneously placed buy and sell orders for almost the same quantity of Xi’an Haitian shares at the same price via two accounts in his name at different brokerages. The orders matched and the trades could have seemed real to observers of the trading system but involved no change of beneficial ownership and so gave false or misleading impressions of demand for and the price of Xi’an Haitian shares. The transactions accounted for about 95% of the market turnover that day.
Note:
- A board lot is the minimum order quantity of shares of a stock that could be entered into the trading system of the Stock Exchange of Hong Kong Limited for automatic order matching. Every transaction concluded via the Automatic Order Matching and Execution System must be for a board lot or multiples of a board lot.
