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Former Sydney FX Trader Sentenced for Falsifying Trading Entries

February 15, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Falsifying Trading Entries, financial products, financial services, FX Trader, internal financial records, larger incentive payments, market, payments, trading

ASICFormer Sydney Deutsche Bank FX options and futures trader, Andrew Donaldson, has been sentenced in the District Court in Sydney to 18 months imprisonment after pleading guilty to falsifying trading entries in Deutsche Bank’s internal financial records and systems.

Mr Donaldson, now living in New Zealand, pleaded guilty to one charge of using his position dishonestly with the intention of directly or indirectly gaining an advantage for himself.

The sentence was fully suspended and Mr Donaldson was released on his own recognisance with a condition to be of good behaviour for 2 years and a security sum of $10,000.

‘Dishonest use of position in the financial services industry, in order to gain a personal advantage, threatens the integrity of our financial markets. ASIC will continue to take regulatory action to address this type of misconduct,’ ASIC Commissioner Cathie Armour said.

Between 25 July 2013 to 25 June 2014, while working as a FX, options and futures trader with Deutsche Bank in Sydney, Mr Donaldson made a total of 85 false entries into Deutsche Bank’s internal records. By making these entries, Mr Donaldson was falsely representing to Deutsche Bank that he had made substantial profits of more than $31 million (AUD) from his trading in financial products, including US Treasury Note Futures.

As detailed in the agreed facts on sentence, the direct or indirect advantage that Mr Donaldson sought to gain by recording these false transactions was to falsely increase his recorded profit, and to mask his actual trading losses. He was then potentially able to meet his annual revenue budget, be eligible for larger incentive payments, and promote himself to a prospective employer.

As the entries related to trades that were fictitious and never executed in the market, no external parties were affected.

The Commonwealth Director of Public Prosecutions prosecuted this matter.

Background

In September 2016, ASIC permanently banned Mr Donaldson from providing financial services, after finding that he had contravened a financial services law, that his conduct was extremely serious and that ASIC had reason to believe that Mr Donaldson was not of good fame and character. (16-332MR).

As a result of his conviction, Mr Donaldson is automatically disqualified from managing corporations until February 2024.

FCA Publishes Its Second Set of Rules Following Its Asset Management Market Study

February 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: asset management, asset management market, Asset Management Market Study, consumers, FCA, funds, investment, market, Rules, The Financial Conduct Authority

fca RulesThe Financial Conduct Authority (FCA) has published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.

The asset management industry plays an important role in the UK’s economy. Asset managers seek returns for investors by investing in a variety of assets.  Over £1 trillion is managed for individual investors and £3 trillion on behalf of UK pension funds and other institutional investors. The FCA’s asset management market study presented evidence of weak price competition in many areas of the asset management industry. This means lower returns for savers, pensioners and other investors.

The FCA has acted to tackle the issues found. In April 2018, the FCA introduced new rules to ensure fund managers act as agents of investors in their funds. Today’s rules and guidance complement that work by helping consumers understand more about how their money is being managed, so that they can make better investment decisions.

The new rules and guidance:

  • set out how fund managers should describe fund objectives and investment policies to make them more useful to investors
  • require fund managers to explain why or how their funds use particular benchmarks or, if they do not use a benchmark, how investors should assess the performance of a fund
  • require fund managers who use benchmarks to reference them consistently across the fund’s documents
  • require fund managers who present a fund’s past performance to do so against each benchmark used as a constraint on portfolio construction or as a performance target, and
  • clarify that where a performance fee is specified in the prospectus, it must be calculated based on the scheme’s performance after the deduction of all other fees

    Christopher Woolard, FCA Executive Director of Strategy and Competition

    Christopher Woolard, FCA Executive Director of Strategy and Competition

Christopher Woolard, the FCA’s Executive Director of Strategy and Competition, commented:

‘We’re working to make competition work better in the asset management market and protect those least able to actively engage with their investments. Today’s remedies build on those we’ve already introduced and will make it easier for investors to choose the best fund for them and help them achieve their investment objectives’.

There is other work ongoing as a result of the Asset Management Market Study. In late November 2018, the Cost Transparency Initiative(link is external) was launched as an independent group working to improve cost and charges transparency for institutional investors. This progressed the work already undertaken by the Institutional Disclosure Working Group. The FCA also continues to work with the Competition and Markets Authority(link is external) on their findings from their investigation into investment consultancy.

FCA Fines Former Fund Manager Paul Stephany

February 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Enforcement, FCA, Financial markets, fund manager, Mark Steward, market, Paul Stephany, UK financial markets

fca logo featuredThe Financial Conduct Authority (FCA) has fined Paul Stephany, a former fund manager at Newton Investment Management Limited, £32,200 for his conduct in relation to an Initial Public Offering (IPO) and a placing.

On two separate occasions, Mr Stephany submitted orders as part of a book build for shares that were to be quoted on public exchanges. Prior to the order books for the new shares closing, Mr Stephany contacted other fund managers at competitor firms and attempted to influence them to cap their orders at the same price limit as his own orders. The FCA found that Mr Stephany risked undermining the integrity of the market and the book build by trying to use their collective power. As a consequence, Mr Stephany failed to observe proper standards of market conduct. He was also found to have acted without due skill, care and diligence by failing to give proper consideration to the risks of engaging in these communications. Mark Steward

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

‘This matter underscores the importance of fund managers taking care to avoid undermining the proper price formation process in both IPOs and placings. These markets play a vital role in helping companies raise capital in the UK’s financial markets and when they are put at risk the FCA will take action.’

SEC Names Manisha Kimmel as Senior Policy Advisor to the Chairman on the Consolidated Audit Trail

February 3, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CAT, Consolidated Audit Trail, Jay Clayton, Manisha Kimmel, market, SEC, Senior Policy Advisor, SRO, technical specifications, transparent markets

SECThe Securities and Exchange Commission today announced that Manisha Kimmel will serve as Senior Policy Advisor for Regulatory Reporting to Chairman Jay Clayton.  In this new role, Ms. Kimmel will coordinate the SEC’s oversight of the self-regulatory organizations’ (SROs) creation and implementation of the Consolidated Audit Trail (CAT).  Ms. Kimmel will work closely with the Division of Trading and Markets and other divisions and offices on the CAT and other regulatory reporting matters.

In the wake of the 2010 “Flash Crash,” the Commission adopted a rule that requires the national securities exchanges and FINRA (collectively, the SROs) to work together to develop and submit to the SEC a plan to create, implement and maintain a CAT.  The CAT is designed to provide a single, comprehensive database that, when fully implemented, will allow regulators to more efficiently and accurately track trading in equities and options throughout the U.S. markets.  The CAT is intended to, among other things, allow the Commission to better carry out its oversight responsibility by improving its ability to reconstruct trading activity following a market disruption or other event, which in turn would allow the Commission to more quickly understand the causes of such an event and respond appropriately.

Jay Clayton, SEC Chairman

Jay Clayton, SEC Chairman

“Manisha knows the value of orderly, deep, and transparent markets to our investors and our country, and I am grateful that she has decided to take on this new, important role,” said Chairman Jay Clayton.  “I am confident that her extensive experience and expertise in market data and regulatory reporting will further enhance the Commission’s ability to effectively oversee the SROs’ implementation of the CAT.”  

“I am honored to have been chosen by the Chairman to advise him on matters related to the SROs’ implementation of the CAT, and I look forward to working with the SEC’s talented staff on these important topics,” said Ms. Kimmel.

Kimmel joins the SEC from Refinitiv, where she served as Head of Regulatory and Compliance, Wealth Management.  In addition to her role at Refinitiv, Ms. Kimmel served on the Advisory Committee for CAT NMS LLC, a diverse group of industry experts that offers advice to SROs on technical specifications, reporting functionality, and other matters relating to the CAT.  She has previously been a member of the SEC’s Equity Market Structure Advisory Committee (EMSAC).  Prior to her time at Refinitiv, Ms. Kimmel served as Managing Director of the Financial Information Forum, where she worked with broker dealers, exchanges, and vendors on issues involving regulatory and market data technology issues.  She has also held positions at Jordan & Jordan and Automatic Data Processing. Ms. Kimmel earned her B.S. in Economics from the Wharton School of Business at the University of Pennsylvania and her B.S. in Engineering from Penn’s School of Engineering and Applied Sciences.

Finance Experts Say US Economy Faces Zero Growth but Recession Unlikely

January 31, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, capital commitments, Economic Growth, economy, Finance Expert, government, market, Recession Unlikely, US Economy, WE Forum, world economic forum

weforum featured

  • Zero growth in the US economy in 2019 is a serious risk if the government shutdown, trade war with China and Brexit are not resolved – but recession is unlikely
  • Trump has not delivered on campaign promises about workers’ rights and resentment is building; the government shutdown is now putting air traffic at risk
  • For more information about the Annual Meeting, visitwww.weforum.org

Davos-Klosters, Switzerland, 24 January 2019 – The failure to find ways out of the longest US Federal Government shutdown in history, the ongoing trade war with China and the UK’s Brexit impasse risk dragging the US economy down to zero growth in 2019 – but a recession is unlikely, according to finance experts debating the future of America’s economy at the World Economic Forum Annual Meeting.

“The shutdown, if it continues, will be very problematic,” said Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University, USA. “The estimate of zero growth is not crazy at all,” he added.

Brian T. Moynihan, Chairman and Chief Executive Officer of Bank of America Corporation, was more bullish, estimating growth at 1.9% for 2019. His evidence includes strong employment, solid consumer activity and business optimism that is running higher than two to three years ago. For those fearing a recession, he recommends keeping an eye on declines in consumer spending and capital commitments.

Market unease may be due to the fact that, from June 2009 to the present, we’ve seen almost the longest period of US growth since World War II, so people naturally think something’s got to go wrong, said David Rubenstein, Co-Founder and Co-Executive Chairman, Carlyle Group, one of the world’s largest investment firms. Rubenstein said he expects the trade war with China to be resolved in the next two to three months as both sides realize they need to make moves or suffer greater consequences. He also said he expects the shutdown to be resolved soon as Republicans and Democrats will both bear the blame the longer it drags on. However, “if we don’t resolve that [shutdown] in the reasonable future it will really impact the economy,” he added.

People should be wary of the $23 trillion of federal debt, maintained Rubenstein. Rogoff dismissed his concerns as a medium- to long-term problem, arguing that Republicans don’t think it matters as much as tax cuts and Democrats don’t think it matters as much as government spending. However, with the US borrowing $1.2 trillion of its annual $4.2 trillion budget, that cannot be sustained – especially if interest rates rise, argued Rubenstein: “At some point the markets will wake up and say they can’t tolerate it,” he said.

Meanwhile, resentment among US workers is growing as President Trump fails to deliver on his campaign pledges of fairer trade rules and stronger labour protections. The $3.2 trillion deficit in investment in infrastructure – the solution of which was supposed to deliver strong job growth – has not moved, according to Elizabeth Shuler, Secretary-Treasurer and Chief Financial Officer, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), USA. “We see an uprising across the country,” she said, as companies like Amazon and Uber join a “race to the bottom” in terms of workers’ pay and rights.

In Los Angeles, 30,000 teachers are picketing for more pay and lower class sizes. The government shutdown has left 800,000 federal workers on furlough or working without pay. “If you heard what air traffic controllers and pilots are saying, you probably wouldn’t be flying back into the United States,” Shuler added, as essential manual checks on air traffic control systems go unperformed.

The World Economic Forum Annual Meeting brings together more than 3,000 global leaders from politics, government, civil society, academia, the arts and culture as well as the media. It engages some 50 heads of state and government, more than 300 ministerial-level government participants, and business representation at the chief executive officer and chair level. Convening under the theme, Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution, participants are focusing on new models for building sustainable and inclusive societies in a plurilateral world. For further information, please click here.

Traiana Provides Central Clearing Connectivity to HKEX OTC Clear for FX Deliverables

January 30, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, Central Clearing Connectivity, CME, FX, FX Deliverables, FX trades, HKEX, HKEX OTC Clear, innovative initiative, investment, lifecycle management, market, trade, Traiana

CME Group  FX DeliverablesTraiana, a leading infrastructure service which provides trade life-cycle and risk management solutions, today announced that it has provided direct central clearing connectivity to the Hong Kong Exchanges (HKEXs) and Clearing’s OTC Clearing Hong Kong (OTC Clear).

Market participants can now access HKEXs OTC Clear service to clear USD/CNH and USD/HKD FX forward and swaps, vTraiana, a leading infrastructure service which provides trade life-cycle and risk management solutions, today announced that it has provided direct central clearing connectivity to the Hong Kong Exchanges (HKEXs) and Clearing’s OTC Clearing Hong Kong (OTC Clear).ia Traiana’s Clearing Hub (CCP Connect), which provides affirmation, matching and trade processing capabilities.

HKEXs OTC Clear Deliverable FX service can be used to mitigate settlement risk which arises when payments and receipts of different currencies occur at different intervals during a standard bilateral settlement process. The service can also be used to offset settlement exposure with its clearing house cross currency swaps service.

Member banks are now able to clear deliverable FX trades, irrespective of how they were executed, using one of Traiana’s many connectivity and workflow options. Existing Traiana clients and electronic trading venues can enable the HKEX clearing workflow as an add-on to their existing Traiana FX post-trade processing services.

“We are very happy to be working with Traiana,” said Jacky Mak, Head of OTC and FIC Business Development in HKEX’s Clearing Division. “It enhances our ability to connect with the growing number of market participants interested in HKEX’s broad range of services including RMB-related services.” 

“As the number of firms looking to voluntary clear FX instruments continues to rise, central clearing connectivity is becoming more and more important to our client base,” said CME Head of Optimization Asia, Guy Rowcliffe. “Our partnership with HKEX, provides the market with an innovative initiative which can be used to address a number of challenges associated with standard bi-lateral trade lifecycle management.”

Traiana is a part of CME Group.

SEC Brings Charges in Edgar Hacking Case

January 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: EDGAR, Edgar Hacking Case, Exchange Commission, illicit trades, investigation, market, Market Abuse, SEC, traders

SECThe Securities and Exchange Commission today announced charges against nine defendants for participating in a previously disclosed scheme to hack into the SEC’s EDGAR system and extract nonpublic information to use for illegal trading. The SEC charged a Ukrainian hacker, six individual traders in California, Ukraine, and Russia, and two entities. The hacker and some of the traders were also involved in a similar scheme to hack into newswire services and trade on information that had not yet been released to the public. The SEC charged the hacker and other traders for that conduct in 2015 (see here, here and here).

The SEC’s complaint alleges that after hacking the newswire services, Ukrainian hacker Oleksandr Ieremenko turned his attention to EDGAR and, using deceptive hacking techniques, gained access in 2016. Ieremenko extracted EDGAR files containing nonpublic earnings results. The information was passed to individuals who used it to trade in the narrow window between when the files were extracted from SEC systems and when the companies released the information to the public. In total, the traders traded before at least 157 earnings releases from May to October 2016 and generated at least $4.1 million in illegal profits.

SEC Brings Charges in Edgar Hacking Case

SEC Brings Charges in Edgar Hacking Case

Edgar Hacking Case Stephanie Avakian

Stephanie Avakian

“International computer hacking schemes like the one we charged today pose an ever-present risk to organizations that possess valuable information,” said Enforcement Division Co-Director Stephanie Avakian. “Today’s action shows the SEC’s commitment and ability to unravel these schemes and identify the perpetrators even when they operate from outside our borders.”

“The trader defendants charged today are alleged to have taken multiple steps to conceal their fraud, including using an offshore entity and nominee accounts to place trades,” said Enforcement Division Co-Director Steven Peikin. “Our staff’s sophisticated analysis of the defendants’ trading exposed the common element behind their success, providing overwhelming evidence that each of them traded based on information hacked from EDGAR.”

The SEC’s complaint alleges that Ieremenko circumvented EDGAR controls that require user authentication and then navigated within the EDGAR system. Ieremenko obtained nonpublic “test files,” which issuers can elect to submit in advance of making their official filings to help make sure EDGAR will process the filings as intended. Issuers sometimes elected to include nonpublic information in test filings, such as actual quarterly earnings results not yet released to the public. Ieremenko extracted nonpublic test files from SEC servers, and then passed the information to different groups of traders.

The SEC’s complaint alleges that the following traders received and traded on the basis of the hacked EDGAR information:

• Sungjin Cho, Los Angeles, California
• David Kwon, Los Angeles, California
• Igor Sabodakha, Ukraine
• Victoria Vorochek, Ukraine
• Ivan Olefir, Ukraine
• Andrey Sarafanov, Russia
• Capyield Systems, Ltd. (owned by Olefir)
• Spirit Trade Ltd.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced related criminal charges.

The SEC’s complaint charges each of the defendants with violating the federal securities antifraud laws and related SEC antifraud rules and seeks a final judgment ordering the defendants to pay penalties, return their ill-gotten gains with prejudgment interest, and enjoining them from committing future violations of the antifraud laws. The SEC also named and is seeking relief from four relief defendants who profited from the scheme when defendants used the relief defendants’ brokerage accounts to place illicit trades.

The SEC’s investigation, which is ongoing, was conducted by Market Abuse Unit and Cyber Unit staff David Bennett, Arsen Ablaev, Michael Baker, Jason Burt, Laura D’Allaird, Adam Gottlieb, James Scoggins, David Snyder, Jonathan Warner, Darren Boerner, and John Rymas, and IT Forensics staff Ken Zavos, Douglas Bond, Stephen Haupt, Gi Nguyen, and Jennifer Ross. The Division of Economic and Risk Analysis and the Office of Information Technology provided substantial assistance. The investigation was supervised by Robert Cohen, Joseph Sansone, and Carolyn Welshhans. Cheryl Crumpton and Stephan Schlegelmilch are leading the SEC’s litigation. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, and the U.S. Secret Service.

Top 9 Market Structure Trends for 2019

January 12, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: economy, Exchanges Grow, Greenwich, industry, industry news, LIBOR, market, market structure, Market Structure Trends, Money

greenwich logo bigThe post-credit crisis era is over in financial markets. Easy-money policies around the world are coming to an end, interest rates are rising, volatility is returning, and what felt like endless market upswings are no longer assured.

If 2019 marks the start of a new era, a period of uncertainty will usher it in. Regulatory frameworks and technological innovations put in place since the crisis are, as yet, unproven under fire, and some trading desks are now run by people who were still in school when Lehman Brothers failed.

In this unsettled environment, Greenwich Associates today released its Top 9 Market Structure Trends for 2019, a list that includes:

Volatility Tests New Market Structure: The market structure built since the end of the global credit crisis might get its first real test in 2019.

The Death of LIBOR: Although the death sentence handed out to LIBOR in the wake of the rates manipulation scandal won’t officially be imposed for two years, the transition to new benchmarks like SOFR and SONIA will consume legal and operations teams for months to come.

Exchanges Grow in Importance (and Size): The importance of exchanges around the world has grown tremendously over the past decade, and 2019 will see them advance even further.

Data, Data and More Data: The data obsession within financial services is not over-hyped—not even close. The amount of data will only grow as we continue to scratch the surface in terms of ways it can be applied to making money in the markets.

New Year’s Message from JPX Group CEO Kiyota

January 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Corporate governance, ESG investment, ETF market, JPX, market, market infrastructure, stimulus packages, stock market, TOCOM, US stocks

JPX LogoHere’s wishing you a happy new year. As JPX Group CEO, I would like to wish everyone health and success in 2019.

Let me first give a quick recap of the stock market in the past year.
Even as tensions from the Korean peninsula receded in 2018, many factors for alarm surfaced from time to time, among them, China-US trade frictions, the growing complexity of the situation in the Middle East, and uncertainty over Brexit.
Despite these, the Nikkei 225 momentarily breached JPY 24,000 for the first time since the bubble era. However, a subsequent slide in US stocks affected markets worldwide, pulling the Nikkei 225 back down below JPY 20,000 around the end of the year.

Turning to the primary market, Japan saw a total of 98 IPOs, the largest figure since the TSE-OSE merger. In these five years, we have identified some potential aspects of our market structure and the corresponding listing rules that should be improved.
As such, last year, we created an advisory group of external experts to discuss and review issues related to the market structure at TSE and its optimal form. We are gathering feedback and will take into account the needs of listed companies and investors as we consider the best way forward.
In recent years, JPX has joined the Japanese government in pressing onward on corporate governance reform aimed at enhancing corporate value over the mid to long term. Last year, we released a revision to Japan’s Corporate Governance Code to further strengthen the push for more substance in corporate governance reform.
As the market operator, we will continue to support listed companies in moving their corporate governance initiatives from “form” to “substance” so as to sustain corporate growth and enhance corporate value over the mid to long term. In doing so, we will do our part for the growth of the Japanese economy.

In terms of other JPX initiatives, 2018 was also the year for applying the finishing touches on our second medium-term management plan. We replaced our clearing system for listed derivatives, began using AI for market surveillance, shortened the JGB settlement cycle, enhanced our ETF market, and consolidated the trading unit for all stocks to 100 shares.
Besides aggressively pursuing initiatives to encourage ESG investment for the SDGs, which is a new management objective, we are engaged in discussions with TOCOM toward the long-term undertaking of bringing together securities and financial and commodity derivatives under a “comprehensive exchange”.
We will continue working to reinforce the market infrastructure and stably provide resilient markets for everyone to invest with confidence, and meet the expectations of our market users.

Finally, allow me to share my views on the market for 2019.
Despite many uncertainties, according to the OECD Economic Outlook released in November 2018, global real GDP is forecast to grow by 3.5%.
In Japan, the consumption tax will be raised. Reactions to past consumption tax hikes have invited concerns over the next one’s impact on the business climate, but the government’s bold stimulus packages and tax relief plans have assured me that the economy will avoid being pulled into a slump.

The US stock market started the year in turbulent mood, but we only have to look at how Japanese companies have worked to improve corporate governance and increase their earning power to feel confident about the year ahead.
With a new Emperor set to accede to the throne in May, the Rugby World Cup coming to Japan in the fall, and Tokyo preparing for the 2020 Summer Olympics and Paralympics, Japan is just buzzing with excitement and expectation for the future.

Incidentally, 2019 is the Year of the Boar in the Japanese zodiac calendar. There is a stock market adage, “the boar firms (i-katamaru)”. Stock prices might sometimes move downward in search of steadier ground. I hope that in the coming year we will see the boar trample hard to firm the ground below and set the stage for prices to soar.

Thank you for your warm support in the past year, and I hope to enjoy your continued cooperation in 2019. Have a good year ahead.

SFC Reprimands and Fines Ardon Maroon Fund Management (Hong Kong) Limited $800,000 for Cross Trade Related Failures

December 31, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: active trading, Ardon Maroon Fund Management, Cross Trade Related Failures, Financial Position, financial situation, market, market integrity, SFC, silver asset management

sfcThe Securities and Futures Commission (SFC) has reprimanded and fined Ardon Maroon Fund Management (Hong Kong) Limited (Ardon Maroon) (now known as China Silver Asset Management (Hong Kong) Limited) $800,000 for cross-trade related failures in managing the Ardon Maroon Asia Master Fund (AM Fund) (Note 1).

The SFC found that Ardon Maroon gave instructions to a brokerage to execute a cross trade for 15 million shares of a listed company on the Stock Exchange of Hong Kong on 8 August 2014, which resulted in the AM Fund conducting a wash trade.  Ardon Maroon then instructed another brokerage to deliver the relevant shares to settle the wash trade.

A cross trade that does not involve any change of beneficial ownership is a wash trade which is presumed to be manipulative under the Securities and Futures Ordinance (SFO) and is not in the best interests of market integrity (Note 2).  The wash trade conducted by the AM Fund was also not in the best interests of the holders of the fund because by doing so, the fund incurred undue transaction costs of over $133,000.

By instructing the cross trade, Ardon Maroon failed to exercise due skill, care and diligence in managing the AM Fund (Note 3).

In deciding the disciplinary sanction, the SFC took into account:

  • the Disciplinary Fining Guidelines;
  • the cross trade was an isolated incident;
  • Ardon Maroon has an otherwise clean disciplinary record with the SFC;
  • Ardon Maroon did not benefit from the cross trade;
  • a clear message needs to be sent to fund managers that the SFC would not tolerate conduct that is not in the best interests of the clients and market integrity; and
  • Ardon Maroon’s financial situation (Note 4).

End

Notes:

  1. Ardon Maroon changed its name to China Silver Asset Management (Hong Kong) Limited in November 2015.  It is licensed under the SFO to carry on Type 9 (asset management) regulated activities.
  2. Sections 274 and 295 of the SFO provide that a person who enters into any transaction of sale and purchase of securities that does not involve a change of beneficial ownership shall be regarded to have created a false and misleading appearance of active trading in the securities unless the transaction is an off-market transaction.
  3. General Principle 2 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission requires licensed corporations to act with due skill, care and diligence, in the best interests of its clients and the integrity of the market.
  4. But for the firm’s financial position, the SFC would have imposed a heavier fine against it.
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