This content is from: Local Insights

Hong Kong

Market manipulation, which involves deception and dishonesty, has long been regarded as a serious crime in Hong Kong. But despite a maximum penalty of two years' imprisonment, it appears there are no sentencing guidelines relating to it.

In the past, offenders have only been hit with fines, community service orders or suspended sentences. For instance, in the recent District Court Gay Giano case, which involved illicit trading through a complex network of accounts, one of the defendants received 240 hours community service, while the other was given a nine-month sentence suspended for three years. However, the Hong Kong High Court recently confirmed that market manipulation is a serious crime that warrants an immediate custodial sentence.

On October 3 2002 the High Court dismissed appeals lodged by Choy Wai Zak and Yuen, Cyril Sze Ning against the immediate custodial sentences imposed on them for market manipulation. In March 2002, Choy and Yuen were convicted at the Western Magistracy of manipulating the shares of Hong Kong Parkview Group Limited. In fact, they had created a misleading appearance of active trading by effecting sales and purchases of shares that involved no change in the beneficial ownership. Choy was convicted of two offences and sentenced to a total of eight months' imprisonment, while Yuen was convicted of one offence and sentenced to four months' imprisonment.

Senior counsel for the defendants contended that the sentence was a "substantial departure" from the norm since there were no aggravating factors in the case. Appeal judge Justice Gareth Lugar-Mawson conceded "this case was not sophisticated market manipulation". However, because it was an offence striking at the fair and honest operation of the securities market that could lead to a large profit for the offender and large losses for the public, the judge stressed the sentences could not be considered as manifestly excessive. He also noted that in the previous 14 cases of market manipulation since 1993, all but one of the defendants pleaded guilty.

The Securities and Futures Commission of Hong Kong has welcomed the court's decision in this case.

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