The Securities and Futures Commission (SFC) has banned Mr Peter Law Chi Kin, a former licensed representative of Convoy Asset Management Limited (CAML), from re-entering the industry for 10 years from 26 April 2023 to 25 April 2033 for taking part in a stock manipulation scheme. The SFC also fined Law $535,500, equivalent to the profit that he gained from participating in the scheme (Note 1).
From June to July 2016, Law was persuaded by his colleague Mr Wong Kwun Shing to join the stock manipulation scheme. He went on to solicit and arrange for 10 of his clients and friends to buy the shares of a company listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (Company A) from the manipulators involved in the scheme. His clients agreed to hold onto the shares for one to three months during which the manipulators would purportedly push up the share price. They also agreed to sell them only with his permission in return for cash rebates of 12% to 15% of the transaction value. However, his clients ended up suffering substantial losses because they were not allowed to offload their shares before the share price of Company A collapsed (Notes 2 & 3).
The SFC also found that Law coordinated with Wong to arrange the transactions through which his clients bought the shares from the manipulators. On each occasion, Wong would confirm the date, time, size and price with the manipulators in advance and inform Law of the same. Law would then give detailed instructions to his clients to ensure that their bid orders would match the manipulators’ ask orders. After the transaction was completed, Wong would collect the cash rebates from the manipulators and pay Law for onward distribution to his clients.
By doing so, Law received $535,500 from the manipulators for his involvement in the scheme, but he did not disclose to his clients that he would receive commission for soliciting them to buy the shares of Company A.
Furthermore, Law told his clients that the scheme was riskless, and he repeatedly gave them reckless advice. This included dissuading his clients from offloading their shares when the share price of Company A began to fall and reassuring them that they would recoup their losses or even make a profit by holding onto the shares. As a result, his clients missed the opportunities to mitigate their losses.
On Law’s recommendation, two clients tapped the overdraft facilities offered by a brokerage firm to fund their purchase of the shares of Company A. However, he did not explain to them the risks that they might be required to deposit extra cash into their accounts should the market value of their shares fall. The shares of the two clients were force sold by the brokerage firm when the share price of Company A plummeted.
Law’s conduct fell far short of the standards set out in the Code of Conduct for Persons Licensed by or Registered with the SFC, and casts serious doubts on his character, reliability and ability to carry on regulated activities competently, honestly and fairly. The SFC considers that he is not fit and proper to be a licensed person (Note 4).
In determining the sanction against Law, the SFC has taken into account all relevant circumstances, including:
Law’s misconduct was deliberate, serious and blatantly dishonest and led to significant losses for his clients;
a strong deterrent message to the industry that the SFC will not tolerate such misconduct;
Law’s admission of his involvement in the scheme and willingness to accept disciplinary sanctions, as well as his remorse; and
his otherwise clean disciplinary record.
End
Notes:
Law was licensed to carry on Type 1 (dealing in securities) regulated activity under the Securities and Futures Ordinance and was accredited to CAML (currently known as OnePlatform Asset Management Limited) from 12 October 2012 to 15 December 2016. Law is currently not licensed by the SFC.
Wong was banned for life by the SFC. Please refer to the SFC’s press release dated 1 March 2023.
Company A was subsequently privatised and the listing of its shares was withdrawn in 2021.
Please refer to the Statement of Disciplinary Action for details of the relevant regulatory provisions.
