The East Magistrates’ Court today sentenced Ms Christine Yeung Tak Sum, an unemployed retailer, after pleading guilty to securities fraud involving illegal short selling in proceedings brought by the Hong Kong Securities and Exchange Commission (SFC).
Yeung’s conviction on a charge of using a fraudulent scheme with intent to defraud securities transactions under section 300 of the Securities and Futures Ordinance (SFO) in illegal short selling is the first of its kind. This case arose out of a ramp and dump investigation in which the SFC discovered that Yeung had engaged in a fraudulent scheme to commit the offence.
Yeung was remanded in custody pending sentencing on March 20, 2024.
The Court heard that on May 28, 2020, Yeung submitted a settlement order form to broker Aristo Securities Limited purporting to hold 15 million shares of Hong Kong-listed Aurum Pacific (China) Group Limited in another brokerage firm, when in fact she did not he did it. The broker, misled, allowed Yeung to sell the Aurum shares before the purported share transfer was settled.
Yeung did not own any of the Aurum shares at the time she submitted the settlement order form and when she sold the shares. After illegally short selling Aurum shares, it proceeded to repurchase the same amount of shares at a lower price to cover its open positions within the same day. As a result, he obtained an illegal profit of approximately $602,600.
The SFC reminds intermediaries of their obligation to implement and maintain appropriate measures to comply with short selling requirements and to be aware of red flags indicating illegal short selling by its clients.