Wash Trade Arranged by Fund

As announced on 27 Dec 2018, SFC reprimanded and fined Ardon Maroon Fund Management (Hong Kong) Limited (now known as China Silver Asset Management (Hong Kong) Limited) $800,000 for cross-trade related failures in managing Ardon Maroon Asia Master Fund (AM Fund).

On 8 Aug 2014, Ardon Maroon gave instructions to one of its brokerages to execute

a cross trade for 15 million shares of a listed company on SEHK, which resulted in AM Fund conducting a wash trade and incurring transaction costs totalling $133,056. In respect of the cross trade ordered by Ardon Maroon, AM Fund was both the buyer and seller of the relevant shares.

Ardon Maroon then instructed another brokerage, which received 48 million shares of the same company, to deliver 15 million of such shares to settle the wash trade. 

Ardon Maroon claimed that the cross trade was conducted for the purposes of moving

shares between the two brokerages so as to reduce margin requirement at the

brokerage receiving the 48 million shares and achieve better financing at the

brokerage conducting the cross trade.

Use of wash trade for share transfer purpose is ridiculous!

Failure to Timely Disclose Inside Information

Recent SFC has commenced proceedings in the Market Misconduct Tribunal against CMBC Capital Holdings Limited (1141.hk, formerly known as Mission Capital Holdings Limited) and its former directors for failing to disclose inside information as soon as reasonably practicable.

On 13 Oct 2014, CMBC Capital's Company Secretary sent an email to inform the board of directors that the company had recorded a significant improvement in financial performance in the sense that:

• Interim result up to 30 Sep 2013 – Loss HK$12m
• Annual result up to 31 Mar 2014 – Profit HK$417m
• 5-month unaudited result up to 31 Aug 2014 – Profit HK$838m (mainly contributed by securities investment)

SFC has considered the 5-month profit as inside information.  However, CMBC Capital did not issue any profit alert announcement as such until 7 Nov 2014 (i.e. late for less than one month since the email issued on 13 Oct 2014). As a result, SFC has commenced the MMT proceedings.

This case is alarming to Hong Kong listed companies because many of them may not think unaudited result of less than 6 months could still be deemed as inside information and slightly late disclosure would be a big problem. I also wonder how CMBC Capital's Company Secretary advised the board during Oct 2014.