In February 2011, the Securities and Futures Commission in Korea took enforcement action against Deutsche Securities Korea Co. (DSK) for market manipulation through the exploitation of spot-futures and the setting up of speculative derivative position that benefited from the price fall of KOSPI200 during the closing auction period on 11 November 2010.
Traders of Deutsche Bank AG located in Hong Kong were found to have originated the manipulative order instructions. The manipulation was referred to the prosecution office in Korea to criminally prosecute DSK and the involved traders for violation of the Financial Investment Services and Capital Markets Act.
Following a trial at the Seoul Central District Court, DSK and a Korea-based trader, who executed the manipulative orders, were found guilty of manipulating KOSPI200 for the purpose of making illegal profits for Deutsche Bank AG and DSK. Deutsche Bank AG and DSK were ordered to forfeit about KRW43,695 million profit derived from the manipulative trades. The traders in Hong Kong were not convicted because of their absence from the trial. However, the Court concluded that the traders in Hong Kong conspired to manipulate KOSPI200. The Seoul Central District Court sentenced the Korean trader to 5 years of imprisonment and fined DSK KRW1.5 billion on 25 January 2016.
Ong was one of the traders in Hong Kong. He was responsible for the decision to liquidate the holding of Korean stocks, which caused KOSPI200 to fall 2.79%, and to establish an option position to profit from the KOSPI200 fall.
SFC was unable to take a legal action against Ong by using the market misconduct provisions under the SFO because he didn't manipulate the Hong Kong market. But SFC can always cast serious doubts on his fitness and properness to be a licensed person.
