Hong Kong’s Securities and Futures Commission (SFC) has banned Mr Peter Law Chi Kin, a former licensed representative of Convoy Asset Management Limited (CAML), from re-entering the industry for 10 years.

The ban, which runs from 26 April 2023 to 25 April 2033, stems from Law’s taking part in a stock manipulation scheme. The SFC also fined Law $535,500, equivalent to the profit that he gained from participating in the scheme.

From June to July 2016, Law was persuaded by his colleague Mr Wong Kwun Shing to join the stock manipulation scheme. He went on to solicit and arrange for 10 of his clients and friends to buy the shares of a company listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (Company A) from the manipulators involved in the scheme.

His clients agreed to hold onto the shares for one to three months during which the manipulators would purportedly push up the share price.

They also agreed to sell them only with his permission in return for cash rebates of 12% to 15% of the transaction value.

However, his clients ended up suffering substantial losses because they were not allowed to offload their shares before the share price of Company A collapsed.

The regulator also found that Law coordinated with Wong to arrange the transactions through which his clients bought the shares from the manipulators. On each occasion, Wong would confirm the date, time, size and price with the manipulators in advance and inform Law of the same. Law would then give detailed instructions to his clients to ensure that their bid orders would match the manipulators’ ask orders. After the transaction was completed, Wong would collect the cash rebates from the manipulators and pay Law for onward distribution to his clients.

By doing so, Law received $535,500 from the manipulators for his involvement in the scheme, but he did not disclose to his clients that he would receive commission for soliciting them to buy the shares of Company A.

Furthermore, Law told his clients that the scheme was riskless, and he repeatedly gave them reckless advice. This included dissuading his clients from offloading their shares when the share price of Company A began to fall and reassuring them that they would recoup their losses or even make a profit by holding onto the shares. As a result, his clients missed the opportunities to mitigate their losses.

On Law’s recommendation, two clients tapped the overdraft facilities offered by a brokerage firm to fund their purchase of the shares of Company A. However, he did not explain to them the risks that they might be required to deposit extra cash into their accounts should the market value of their shares fall. The shares of the two clients were force sold by the brokerage firm when the share price of Company A plummeted.

The SFC considers that Law is not fit and proper to be a licensed person.

In determining the sanction against Law, the SFC has taken into account a variety of factors, including that Law’s misconduct was deliberate, serious and blatantly dishonest and led to significant losses for his clients. The regulator also considered the need to send a strong deterrent message to the industry that the SFC will not tolerate such misconduct.