SFC chief vows to probe 'pump and dump' stock trading

May 13, 2015 10:55
Carlson Tong, chairman of the Securities and Futures Commission, voiced concern over market volatility. Photo: HKEJ

Carlson Tong, chairman of the Securities and Futures Commission, said regulators are keeping a close watch on growing volatility in the equity market, particularly cases of manipulation of stock prices, the Hong Kong Economic Journal reported on Wednesday.

Tong was referring to suspected "pump and dump" cases in which the share price, usually of penny stocks, surges suddenly before falling sharply.

Such cases are indicative of insider trading, the newspaper said.

Regulators have warned of growing volatility in the market following the launch of the Shanghai-Hong Kong Stock Connect last November.

The SFC also warned brokerages against opening accounts for mainland investors without following established procedures on authenticating the identity and account execution of clients.

It has been noted that some brokerages resort to the use of video conferencing and other methods to absorb the large client base from the mainland, although these procedures do not comply with the requirements set by the commission.

The SFC said it will take punitive actions against those who violate existing rules on client verification and account opening procedures.

Market observers warned that rising volatility since the launch of the stock connect indicates that immature trading practices in the A-share market are gradually affecting the Hong Kong market.

Charles Li, chief executive of the Hong Kong Exchanges and Clearing Ltd. (00388.HK), also warned of surges in stock prices without the backing of transaction volumes.

Translation by Vey Wong

[Chinese version中文版]

-- Contact us at [email protected]


Hong Kong Economic Journal