DealBook: Hong Kong Broker Fined for Hyping Undisclosed Trades

HONG KONG – A local stockbroker and financial columnist, Sky Cheung, was fined 500,000 Hong Kong dollars ($65,000) on Monday by Hong Kong’s market regulator for profiting on stock trades linked to his column. His broker’s license was also suspended for 30 months.

The Securities and Futures Commission found that on 25 occasions from March 2009 to March 2010, Mr. Cheung bought stocks through an undisclosed account registered in his wife’s name and, shortly afterward, published newspaper columns talking up those stocks.

“Cheung put himself in a conflict-of-interest position by purchasing the stocks shortly before favorable comments were published in his column, and sold them at a profit shortly after publication of the column,” the commission said in a statement. “Cheung’s conduct has cast serious doubt on his ability to carry on the regulated activity competently, honestly and fairly, as well as his reputation, character and reliability.’’

Hong Kong’s financial watchdog has had a number of successes in recent years as it seeks to crack down on market malfeasance, including a prominent criminal conviction of a Morgan Stanley managing director for insider trading. And a push is under way to make the banks that sponsor initial public offerings criminally liable for the accuracy of disclosures made by the companies they are bringing to market.

Mr. Cheung’s missteps were of a more mundane nature. Licensed brokers in Hong Kong are permitted to trade on the side for personal profit, but must disclose this to their employers and have the activity vetted by their senior managers. Mr. Cheung did not declare his activity to his employer at the time, the local brokerage Quam Group. He now works at the Hong Kong unit of Taiwan’s Polaris Securities.

According to the regulator, Mr. Cheung’s tactic was to buy stocks through his wife’s account and then write positively about them in his column, ‘‘Investment Sky,’’ which appears twice a week in the popular Chinese-language newspaper Apple Daily. He would then typically cash out at a profit one to three days after publication.

On several occasions, he would write the columns first, and instruct his assistant to delay publication until after he had time to buy the stocks he was writing about, the regulator said. Other times, Mr. Cheung denied any holdings in the stocks in his column, although they had been purchased through his wife’s account. The regulator said its fine was equal to the profit he made on his undisclosed trades.

In his most recent Apple Daily column on Friday, Mr. Cheung did not single out specific stocks, but waded into a local debate about whether authorities in China and Hong Kong had been over-regulating the market and scaring away investors. He cited the Chinese saying “fish are caught where the waters are muddy,” then turned it around.

“Of course there are no fish when the water is clear,’’ he wrote. ‘‘But if the water is too muddy that will kill a lot of fish.”

This post has been revised to reflect the following correction:

Correction: April 8, 2013

Article source: http://dealbook.nytimes.com/2013/04/08/hong-kong-broker-fined-for-hyping-undisclosed-trades/?partner=rss&emc=rss