SFC bid to tighten rules
ENOCH YIU and Barry Porter
Hong Kong and Singapore authorities are seeking ways to close regulatory loopholes which led to the collapse of an investigation over possible insider trading in Crownhampton International.
Crownhampton has since been renamed Sum Cheong International and, more recently, China Development Corp.
The report released by the Securities and Futures Commission (SFC) yesterday said the alleged illegal deals took place between August and November 1993, ahead of the firm announcing a 250 per cent rise in profit to $56 million for the year to June 30, 1993.
Most of the profit came from the company's Singapore subsidiaries Sum Cheong Piling and Sum Cheong Machinery.
The SFC alleged a small group of people knew the firm's profit and traded the shares before the result was announced, leading to a jump in the shares from $1.05 to $1.51 between October 6 and 19, an increase of 43.8 per cent.
The SFC probe found that more than 30 per cent of the firm's shares traded in the period were bought by investors trading through Singapore brokers.
The brokers refused to give clients' information to the SFC as they could not obtain consent to provide said information. Asked by the SFC to assist, the Monetary Authority of Singapore (MAS) found that even though the alleged transactions were struck by resident Singaporeans, it had virtually no powers to investigate let alone prosecute because the deals were conducted abroad.
Frustrated by lack of progress, the SFC abandoned its investigation in October 1996.
To avoid the same situation recurring, the SFC decided to consult the market on a proposed amendment of the SFC Code of Conduct to address investigatory difficulties which might arise where transactions are effected by a Hong Kong registered person on behalf of a nominee or an investors in foreign countries.
Under the proposed amendment, all brokers must obtain all necessary consents of a client before a transaction is effected, to ensure the brokers can pass the name of the clients behind the nominee upon the SFC's request.
The MAS last night said it was studying whether to seek a change in Singapore's laws to allow greater co-operation with other regulatory bodies in cross-border probes.