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FINANCIAL SERVICES | Staff Reporter, Hong Kong
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SFC slaps $1.5m fine on SFM HK Management over short selling violations

The fund became short of over a million shares in Great Wall Motor Company in 2015.

The Securities and Futures Commission (SFC) has slapped a $1.5m fine on the Hong Kong office of Soros Fund Management (SFM) for failures relating to the short selling of Great Wall Motor Company Limited shares in 2015 on behalf of a fund it managed. 

On 28 August 2015, Great Wall announced its proposed bonus issue of shares, which was equivalent to 200% of its existing issued shares.

The trade support team of SFM HK Management Limited booked 1,616,000 bonus shares into its trading system on 30 September 2015 without segregating them into a restricted account as required by SFM’s internal policy. Consequently, the system indicated that a total of 2,424,000 shares of Great Wall were available for trading when in fact only 808,000 shares were available for trading at that point in time.

As a result of the erroneous system information, one of the fund’s portfolio managers placed an order to sell 2,424,000 shares of Great Wall, causing the fund to become short by 1,616,000 shares in Great Wall.

“The SFC considers that SFM not only failed to act with due skill, care and diligence in dealing in the bonus shares, but also failed to diligently supervise its staff members and implement adequate and effective systems and controls to ensure compliance with the short selling requirements,” the regulator said in a statement.

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