In May 2009 the SFC decided to ban Hung from the industry for life for breaching General Principle 1 of the Code of Conduct after finding he had fraudulently persuaded a client to invest and defrauded other clients using fabricated IPO subscriptions. Hung appealed to the SFAT.
The SFAT appeal was heard before The Honourable Mr Justice Saunders on 5 March 2010.
The SFAT affirmed the SFC's decision and stated that Hung's appeal was "utterly devoid of any merit whatsoever" and that "the investing public deserves to be fully protected from people like Mr Hung and the only way that can be done is to ensure that he should never enter this industry again."
For more details please see Hung SFAT Decision
0-42AD Short position reporting
Friday 5 March 2010
ASIC today has announced decisions made in relation to the following provisions introduced in the Corporations Amendment Regulations 2009 (No 8) (SR No 327 of 2009) (Short Selling Regulations):
The change in the commencement of the short seller’s obligation to report its short positions will allow short sellers more time to ensure they have the appropriate systems in place to meet their reporting obligations.
ASIC will facilitate an industry-wide pilot test to allow short sellers access to the new reporting infrastructure from 10 May 2010.
Additional information
To assist short sellers and systems developers adequately prepare for the new reporting requirements, ASIC has also revised Information Sheet 98, now titled Short selling: Short position reporting (INFO 98).
INFO 98 includes key tasks and practical information which stakeholders must be aware of prior to the revised start date for the reporting requirements. INFO 98 also contains details relating to the threshold for short position reporting and other technical amendments, as well as information about the FIX Rules of Engagement. In the period leading up to implementation, ASIC will regularly update INFO 98.
ASIC will shortly publish a revised Regulatory Guide 196 Short selling (RG 196). This document will contain more details about the decisions described above. Other updates in this document will reflect recent changes in the law, some exemptions provided to allow for certain naked short selling and guidance in relation to the disclosure and reporting requirements that apply.
Questions about short position reporting can be directed to shortpositionreporting@asic.gov.au or visit www.asic.gov.au/shortselling. for further information.
And in Germany:
Bloomberg Europe reports that "Germany’s financial regulator Bafin published rules requiring disclosure of short selling in stocks of banks and insurance companies including Deutsche Bank AG, Commerzbank AG, and Allianz SE, partially implementing a Europe- wide regulatory proposal."
These new developments follow on from the announcement in Hong Kong earlier in the week but more importantly from the announcement of its report into Hedge Fund Systemic Risk reporting by IOSCO.
]]>SFC to adopt new short-position reporting regime
In a set of consultation conclusions released today, the Securities and Futures Commission (SFC) announced that after taking into account industry feedback and the domestic market situation, it will introduce a short-position reporting regime to enhance transparency of short-selling activities in Hong Kong.
The SFC received 21 responses from market participants to its 31 July 2009 consultation paper on increasing short-selling transparency which discussed two possible approaches: enhancing the existing transactional reporting regime and implementing a new short-position reporting model.
“A build-up of large short positions may be potentially disruptive to market stability,” said the SFC’s Chief Executive Officer Mr Martin Wheatley. “A short-position reporting regime will not only complement Hong Kong’s robust short-selling regulatory framework but will also provide a more complete picture of short-selling activities in our market.”
Under the proposed regime, the reporting obligation will be triggered if a short position is equal to or exceeds, 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower. Weekly reports must be submitted to the SFC until the short position falls below both trigger levels. The SFC will publish aggregated short positions of each stock on an anonymous basis a week later.
The proposed short-position reporting regime will only be applicable to constituent stocks of the Hang Seng Index, the H-shares Index, financial stocks and other stocks specified by the SFC. Derivatives will not be included.
The new reporting model will be implemented by a new subsidiary legislation, on which the SFC will be consulting the public in due course.
The consultation paper conclusions reached by the SFC are sad in that they really did not address the issue of the cost of the information that is going to be provided and whether that cost will be of any benefit to Hong Kong. If the rules were in place tomorrow a short position of more than HK16m (just over US2m) in Esprit Holdings (essentially a fashion brand) would need to be reported each week to the HK SFC. The SFC would aggregate the reports and publish them after on an aggregated basis.
The world will clearly be a much safer place with well known fashion brands safe from nasty short sellers and industry participants will pay a tax on their operations to report positions and keep our world peachy.
It must be remembered that Hong Kong already has a strong and functioning short selling process and short selling was not an issue that effected Hong Kong in any adverse way during the financial crisis.
This is not the SFC's finest hour and we hope that future changes are given a bit more thought than this one.
Legislation will be needed and it will take time for that to be drafted and passed.
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Innospec Limited, a UK subsidiary of Innospec Inc, a US NASDAQ listed company, has appeared before District Judge Timothy Workman at City of Westminster Magistrates’ Court in response to a summons from the court on an application from the Serious Fraud Office alleging conspiracy to corrupt, contrary to Section 1 of the Criminal Law Act 1977. This case concerns bribery on a significant scale by Innospec and its agents in Indonesia.
The charge relates to Innospec Limited, that between 14 February 2002 and 31 December 2006, conspired with certain of its directors, executives, employees and agents to give or agree to give corrupt payments [contrary to section 1 of the Prevention of Corruption Act 1906] to public officials and other agents of the Government of Indonesia as inducements to secure, or as rewards for having secured, contracts from the Government of Indonesia for the supply of Tetraethyl Lead (“TEL”) to the said Government of Indonesia by Innospec Limited.
The case was transferred to Southwark Crown Court pursuant to section 51 Crime & Disorder Act 1998 where Innospec Ltd will appear next on 4 March 2010. Details of the alleged offences will be available at that time Innospec Limited of Oil Sites Road, Ellesmere Port, Cheshire manufactures an anti knock fuel additive called TEL.
The case is very interesting and the nagging feeling that the writer has is pot calls kettle black. Major UK business interests have had a long history in Indonesia. Indonesia has a long and notorious history of corrupt practices, embezzlement, graft and fraud.
While we have no views or knowledge on the merits or otherwise of this particular case under the UK laws that exist today, counsel for the defence may wish to consider the extent to which Her Majesty's servants in Indonesia were a part of the problem in the first place.
The UK company's address is Oil Sites Road. Oil is a good place to start.
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The Hong Kong Monetary Authority (HKMA) announced that up to 18 February 2010, there were 12,981 complaint cases concerning Lehman-Brothers-related investment products which have been resolved by a settlement agreement reached under section 201 of the Securities and Futures Ordinance (Notes 1 & 2) and 893 cases through the enhanced complaint-handling procedures required by the settlement agreement. Together with the 2,780 cases closed because insufficient prima facie evidence of misconduct was found after assessment or no sufficient grounds and evidence were found after investigation, the handling of 16,654 complaints received have now been completed.
Currently, 1,056 Lehman-Brothers-related complaint cases (including minibond cases) are under disciplinary consideration after detailed investigation by the HKMA. Proposed disciplinary notices are being prepared in respect of 757 such cases and proposed disciplinary notices or decision notices have been issued in respect of another 299 cases (Note 3). Adding these 1,056 cases to those the handling of which has already been completed, investigation work has finished for 82% of complaint cases received.
(A table summarising the progress of the disciplinary and complaint-resolution work in respect of Lehman-Brothers-related complaints is attached.)
Notes:
On 22 July 2009, the SFC, the HKMA and 16 distributing banks reached an agreement under section 201 of the SFO in relation to the repurchase of Lehman Brothers Minibonds from eligible customers and the HKMA has informed the banks that, since the agreement contains detailed arrangements for settlement of claims and the implementation of robust systems for selling unlisted structured investment products and dealing with related customer complaints in future, it is not the intention of the HKMA to take any enforcement action in relation to Minibond cases that involve eligible customers who accept the repurchase offer.
Since 7 August 2009, 16 minibond distributing banks have begun issuing repurchase offer letters to eligible customers (about 25,000 customers) under the Lehman-Brothers Minibonds Repurchase Scheme (the Scheme) announced on 22 July 2009. Up to 10 February 2010, 24,741 customers have responded to the repurchase offers, of whom 24,477 customers or 98.9% have accepted the offers. As of 31 January 2010, for customers who had accepted the offer, 99.96% of them already received payment from the banks concerned, while the remaining payments will be settled soon (in any case no later than 30 days after having received the duly completed acceptance forms from these customers). Separately, about 4,800 customers who had reached settlements with the banks prior to the introduction of the Scheme are eligible for the voluntary offer made by the banks, with a view to bringing them in line with the eligible customers who accept the repurchase offer under the Scheme. For customers whose previous settlement amount was less than 60% (for customers aged below 65) or 70% (for customers aged 65 or above) of the principal invested, 99.5% had already received top-up payments from the banks concerned on 31 January 2010.
These are cases in respect of which (a) proposed disciplinary notices have been issued and representations were pending, (b) representations have been received and are being reviewed, or (c) disciplinary decision notices have been issued and the persons concerned have been given 21 days to consider whether to appeal to the Securities and Futures Appeals Tribunal.
In their recent Winter summary of securities litigation and recent developments, they set out a very interesting summary of their top 10 litigation issues in 2009.
When we attended the Connecticut Hedge Funds Association meeting in November last year we heard a presentation on upcoming US legislation. The final panelist from another leading securities firm, Bracewell & Guiliani, said that whatever happens in relation to the financial services legislation (and there is a lot of it), one certaintly is that litigation will increase and firms will feel that effect immediately.
2010 will see a number of the issues described develop further and we are expecting Asian enforcement officials to learn from these US developments.
]]>Progress of the HKMA's investigations in Lehman-Brothers-related cases
The Hong Kong Monetary Authority (HKMA) announced today (Friday) that up to 4 February 2010, there were 12,903 complaint cases concerning Lehman-Brothers-related investment products which have been resolved by a settlement agreement reached under section 201 of the Securities and Futures Ordinance (Notes 1 & 2) and 787 cases through the enhanced complaint-handling procedures required by the settlement agreement. Together with the 2,750 cases closed because insufficient prima facie evidence of misconduct was found after assessment or no sufficient grounds and evidence were found after investigation, the handling of 16,440 complaints received have now been completed.
Currently, 1,039 Lehman-Brothers-related complaint cases (including minibond cases) are under disciplinary consideration after detailed investigation by the HKMA. Proposed disciplinary notices are being prepared in respect of 740 such cases and proposed disciplinary notices or decision notices have been issued in respect of another 299 cases (Note 3). Adding these 1,039 cases to those the handling of which has already been completed, investigation work has finished for 81% of complaint cases received.
(A table summarising the progress of the disciplinary and complaint-resolution work in respect of Lehman-Brothers-related complaints is attached.)
For further enquiries, please contact:
Alice Lo, Communications Chief, at 2878 1480 or
Yokee Wong, Manager (Communications), at 2878 1213
Hong Kong Monetary Authority
5 February 2010
Notes:
On 22 July 2009, the SFC, the HKMA and 16 distributing banks reached an agreement under section 201 of the SFO in relation to the repurchase of Lehman Brothers Minibonds from eligible customers and the HKMA has informed the banks that, since the agreement contains detailed arrangements for settlement of claims and the implementation of robust systems for selling unlisted structured investment products and dealing with related customer complaints in future, it is not the intention of the HKMA to take any enforcement action in relation to Minibond cases that involve eligible customers who accept the repurchase offer.
Since 7 August 2009, 16 minibond distributing banks have begun issuing repurchase offer letters to eligible customers (about 25,000 customers) under the Lehman-Brothers Minibonds Repurchase Scheme (the Scheme) announced on 22 July 2009. Up to 3 February 2010, 24,737 customers have responded to the repurchase offers, of whom 24,471 customers or 98.9% have accepted the offers. As of 31 January 2010, for customers who had accepted the offer, 99.96% of them already received payment from the banks concerned, while the remaining payments will be settled soon (in any case no later than 30 days after having received the duly completed acceptance forms from these customers). Separately, about 4,800 customers who had reached settlements with the banks prior to the introduction of the Scheme are eligible for the voluntary offer made by the banks, with a view to bringing them in line with the eligible customers who accept the repurchase offer under the Scheme. For customers whose previous settlement amount was less than 60% (for customers aged below 65) or 70% (for customers aged 65 or above) of the principal invested, 99.5% had already received top-up payments from the banks concerned on 31 January 2010.
These are cases in respect of which (a) proposed disciplinary notices have been issued and representations were pending, (b) representations have been received and are being reviewed, or (c) disciplinary decision notices have been issued and the persons concerned have been given 21 days to consider whether to appeal to the Securities and Futures Appeals Tribunal.
]]>All investors holding the Minibond notes will receive the recovery value for the notes they hold (which is based on the series of notes that were purchased). The total amount received by each investor will depend on the recovery value, as well as the outcome of the dispute resolution process. This is in line with the approach for financial institutions that distributed the notes to review complaints on a case-by-case basis, and to make settlement offers according to the facts and circumstances of each investor and transaction.
MAS reported that taking into account the recovery values of the notes and the settlement offers that have been accepted, 80% of retail investors will receive 50% or more of their investment back.
For further information please see MAS Minibond distribution release
]]>On 1 February the SFC reported the following:
The main proposals, contained in the consultation paper, focus on a new obligation on financial advisers and brokers to formally assess a retail customer's investment knowledge or experience before selling investment products to the customer. It is proposed that the new obligations will apply for all investment products other than a list of products which are already established in the market and generally understandable by retail investors. MAS will prescribe the list of products that will be excluded from the new obligations.
MAS have also included the following proposals in this consultation paper:
(i) Expanding the scope of the CMFAS examination module that was planned for the three classes of unlisted "complex investment products" consulted in March 2009 to cover other non-excluded investment products; and
(ii) Requiring issuers of debentures which are asset-backed securities and structured notes, collective investment schemes and sub-funds of investment-linked life insurance policies to prepare Product Highlights Sheets.
Responses to this consultation paper are due to MAS by 12 March 2010
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