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The Eastern Magistrates’ Court today convicted Mr Law Kwong Shing of one count of illegal short selling in the shares of China Properties Investments Holdings Limited (China Properties).
Law, who pleaded guilty, was fined $3,000 and ordered to pay the Securities and Futures Commission’s (SFC) investigation costs.
The court heard that on 3 May 2011, Law sold 199,940,000 excess rights shares to be issued by China Properties after he had applied for them. The sale occurred before Law received the shares and confirmation as to the quantity of or allocation of excess rights shares, as well as before any public announcement by China Properties on the allocation result of the excess rights shares application (Note 1).
Law’s conduct constitutes illegal short selling contrary to section 170 of the Securities and Futures Ordinance because at the time of the sale, Law did not have reasonable grounds to believe that he had a presently exercisable and unconditional right to sell the shares.
Notes:
- In February 2011, China Properties conducted a rights issue in which its shareholders were entitled to receive 30 rights shares for each existing share. Apart from subscribing for the rights shares, the investors could also apply for excess rights shares.
- The SFC also prosecuted Mr Fok Ken Oi Kin and Premium Stars Investments Limited (Premium Stars) for illegal short selling in relation to the same incident of rights issue of China Properties shares. Fok’s case was adjourned to 15 August 2013 for plea taking. The case of Premium Stars was adjourned to 5 September 2013 for a pre-trial review.
