Hedge fund manager ordered to disgorge $5.6 million illicit profit from false trading and disqualified for four years
3 Jul 2024
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Comments: Obviously SFC's punishment is over slight. Comparing with the punishment with the potential profit: Get caught, return the illegal profit and disqualified for 4 years; Not get caught, keep millions illegal profit without any punishment. Come on, SFC's soft and slight punishment is encouraging peoples tries to occupy client's assets! The over slight punishment will make the investment managers untrusted, destroy the fundation of this market!
The Market Misconduct Tribunal (MMT) has ordered Mr Jonathan Dominic Iu Wai Ching, a former responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), to disgorge illicit profit of over $5.6 million from false trading and disqualified him for four years following legal proceedings brought by the Securities and Futures Commission (SFC) (Note 1).
On 22 trading days between August and September 2014, Iu placed contemporaneous orders in the shares of Sinopharm Tech Holdings Limited and Quantum Thinking Limited through the brokerage accounts of the hedge fund managed by Tarascon and of his mother, leading to opposing orders to be executed against each other. These matched trades, which had the effect of creating a false or misleading appearance of active trading, or with respect to the price for dealings, in the listed shares, resulted in gains of $5.6 million in his mother’s brokerage account at the expense of the hedge fund (Note 2).
At the material time, Iu, who was responsible for managing and making investment decision for the hedge fund, was also a director, the chief investment officer, and a substantial shareholder of Tarascon.
The MMT made the following orders against Iu (Note 3):
a disqualification order prohibiting him from being a director or involved in the management of any listed or unlisted corporation in Hong Kong for four years, effective from 28 June 2024;
he is banned from dealing in securities, futures contracts, leveraged foreign exchange contracts or collective investment schemes in Hong Kong for four years, effective from 28 June 2024;
he is not to engage in any conduct which constitutes market misconduct;
he is to pay to the Government the sum of $5,617,540 being the amount of profit gained by Iu as a result of his market misconduct; and
payment of the SFC’s investigation and legal costs, as well as the costs of the MMT proceedings (Notes 4 to 8).
End
Notes:
Please see the SFC’s press release dated 16 August 2022.
The two companies are listed on GEM of the Stock Exchange of Hong Kong Limited. At the material time, Sinopharm Tech Holdings Limited was known as China Vanguard Group Limited, and Quantum Thinking Limited was known as Yunbo Digital Synergy Group Limited.
The MMT’s decision and a report which sets out the reasons of making the relevant orders is available on the MMT’s website.
Under section 257(1)(a) of the Securities and Futures Ordinance (SFO), an order prohibiting a person to take part in the management of any listed or unlisted company in Hong Kong without the leave of the Court of First Instance.
Under section 257(1)(b) of SFO, an order has the effect of prohibiting a person who is the subject of the order from any dealings, directly or indirectly, in the Hong Kong financial market for the length of the order.
Under section 257(1)(c) of the SFO, an order to prohibit a person who is the subject of the order not to engage in any form of market misconduct in future.
Under section 257(1)(d) of the SFO, an order that the person shall pay to the Government an amount not exceeding the amount of any profit gained or loss avoided by the person as a result of the market misconduct in question.
Under sections 257(1)(e) and (f) of the SFO, orders that a person shall pay to the Government and the SFC for the costs and expenses reasonably incurred.
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