Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Asia Research & Capital Management Limited (ARCM) $1.75 million for failures relating to its non-compliance with the European Union’s short selling reporting requirements (EU Regulation) and to promptly notify the SFC of its material regulatory breaches.

The SFC has also banned Mr Billy Wong Yim Chi, ARCM’s former Head of Compliance and Operations and Manager-In-Charge (MIC) for Compliance for two months from 10 October 2022 to 9 December 2022. This is because ARCM’s failures to comply with the EU Regulation were directly attributable to Wong’s failure to discharge his duties as ARCM’s MIC for Compliance and a member of its senior management during the material time.

On 14 October 2020, the UK’s Financial Conduct Authority (FCA) published a final notice of its enforcement action against ARCM for ARCM’s failures to disclose its net short position in London Stock Exchange-listed Premier Oil plc (Premier Oil) to the FCA and the public between 22 February 2017 to 3 December 2019.

The SFC’s investigation, conducted after the conclusion of the FCA’s enforcement action, found that ARCM failed to implement adequate systems and controls in its compliance framework to monitor and ensure its short position in Premier Oil was properly reported to the FCA and disclosed to the public as required under the EU Regulation.

ARCM also failed to seek legal advice on its reporting obligations under the EU Regulation before it established a short position in Premier Oil even though ARCM was investing in a new jurisdiction and unfamiliar with the EU market. The company also failed to notify the SFC immediately upon becoming aware that it had materially breached the EU Regulation, and only did so after a delay of around two months.

The regulator considers Wong’s conduct fell short of the standard required of him as the MIC for Compliance and a member of ARCM’s senior management at the material time.

In deciding the disciplinary sanctions, the SFC took into account all relevant circumstances, including the remedial actions taken by ARCM to enhance its systems and controls on regulatory disclosure and the cooperation of ARCM and Wong in resolving the SFC’s concerns.