Wednesday, August 26, 2009

Market Misconduct by Overseas Entity

Last week SFC commenced proceedings under S.213 of SFO ("Injunctions and other orders") in the High Court against Tiger Asia Management LLC, a New York-based asset management company, and three of its senior officers, Mr Bill Sung Kook Hwang, Mr Raymond Park and Mr William Tomita. Founded in 2001, Tiger Asia specialises in equity investments in China, Japan and Korea. All of its employees are located in New York. Tiger Asia has no physical presence in Hong Kong.

According to an article of Finance Asia, the Tiger Asia fund is one of many Tiger-branded funds that have been seeded by the original Tiger Fund daddy, Julian Robertson. Hwang's Tiger Asia fund is among the first of the "Tiger baby" funds that Robertson began to nurture in 2000, after he had closed his own, massively successful hedge fund.

SFC has applied for an injunction order to freeze assets of Tiger Asia and the three senior officers, including those located overseas, up to $29.9 million. The amount is equivalent to the notional profit made by Tiger Asia in alleged insider dealing and market manipulation activities.

The proceedings followed an SFC investigation into suspected insider dealing and market manipulation by Tiger Asia and the three senior officers in relation to dealings in the shares of China Construction Bank Corporation (CCB) on 6 January 2009.

SFC alleges that:
  • on 6 January 2009, before the market opened, a placing agent in Hong Kong invited Tiger Asia to participate in a proposed placement of CCB shares in Hong Kong by the Bank of America Corporation (BOA);
  • the placing agent told Tiger Asia about the size and the discount range of the proposed placement;
  • this information was confidential and price sensitive and Tiger Asia and the three senior officers knew this;
  • Tiger Asia then short-sold a total of 93 million CCB shares on 6 January 2009 ahead of the public announcement of the CCB placement;
  • Tiger Asia covered its short sales out of the placement shares that it bought on 7 January 2009 at a discount to the prevailing market price; and
  • Tiger Asia made a substantial notional profit of $29.9 million.

SFC also:

  • alleges downward manipulation of CCB share price by Tiger Asia on 6 January 2009 at the time of the short sales;
  • is seeking final orders against Tiger Asia and the three senior officers, including orders to unwind the relevant transactions if the court finds the transactions have contravened SFO and to restore affected counterparties to their pre-transaction positions;
  • considers it necessary to seek a freezing order to ensure there are sufficient assets to satisfy any restoration orders that may be made by the court; and
  • is seeking orders to prevent Tiger Asia and the three senior officers from trading in listed securities and derivatives in Hong Kong in similar circumstances.

Overseas entities might think that SFC can never taken any legal / regulatory action against their insider dealing and market manipulation because they are not located at Hong Kong. Let's see if SFC can "beat the tiger" this time.

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