15 September 2011
Securities and Exchange Surveillance Commission
1. The Securities and Futures Commission of Hong Kong (hereinafter referred to as “SFC”) announced today that it has reprimanded Oasis Management (Hong Kong) LLC (hereinafter referred to as “Oasis”) and its Chief Investment Officer, Mr. Seth Hillel Fischer (hereinafter referred to as “Fischer”), and fined each of them HKD 7,500,000 pursuant to the applicable law of Hong Kong. Oasis and Fischer are both licensed by the SFC. The disciplinary action taken by SFC is based on concerns SFC held as to the fitness and properness of Oasis and Fischer regarding a series of transactions carried out by them on behalf of two funds (the “Funds”) in the Japanese stock market in 2006.
The series of transactions in question were detected by the market surveillance of the Securities and Exchange Surveillance Commission (hereinafter referred to as “SESC”). SESC has continuously provided information relating to the relevant transactions as well as information relating to the relevant laws and regulations of Japan and market practice in Japanese market, etc. to the SFC. The disciplinary action by SFC has been generated by such close cooperation between SESC and SFC.
2. The outline of the case disciplined by SFC is as follows.
After Japan Airlines Corporation announced a public offering in 2006, Oasis applied for subscription of new shares. On 19 July 2006, the issue price determination date, Oasis took the following action:
(1) Placement of a large number of buy market orders on close in the last 15 minutes prior to the market close and cancelled them subsequently; and
(2) Placement of a massive amount of short selling orders at prices lower than the latest execution prices in the last five minutes prior to the market close. Some of such short selling orders violated the short selling regulation under the Securities and Exchange Law of Japan.
On the settlement day, Oasis failed to deliver shares in nearly 70% of the shares they had short sold and approximately 50% of these transactions were covered by new shares issued by JAL in the public offer.
SFC recognized that the series of transaction conducted by Oasis, which originated in Hong Kong and were executed by Fischer, appeared designed to drive down the closing price of JAL on the issue price determination date of JAL shares. SFC also recognized that a lower closing price would benefit the Funds as subscribers for the new shares. In light of these matters, SFC held concerns as to the fitness and properness of Oasis and Fischer under the applicable law of Hong Kong.
3. The disciplinary action taken by SFC was an outcome produced by close cooperation between SFC and SESC to address misconducts caused by cross-border transactions. SESC highly appreciates the disciplinary action taken by SFC. Henceforth, SESC is determined to strictly address market misconducts involving the Japanese securities markets, regardless of whether such misconducts are conducted by residents or non-residents, and to further strengthen cross-border cooperation with foreign authorities to enhance confidence in the market.