High Court upholds acquittal of trader

PUBLISHED : Wednesday, 10 August, 2005, 12:00am
UPDATED : Wednesday, 10 August, 2005, 12:00am


Judge endorses exoneration of suspect in case brought by securities regulators

Securities regulators have failed to reverse a decision to acquit a futures trader for a commodities offence likened to 'a bit like trying to sell drugs in front of a policeman'.

In the one and only prosecution of an individual for 'employing a device, scheme or artifice to defraud' under Hong Kong's repealed Commodities Trading Ordinance, the High Court yesterday upheld a decision to exonerate Yang Chih-chen.

Mr Yang had been accused by the Securities and Futures Commission of trying to defraud a purchaser of September 2002 Hang Seng Index futures contracts in July that year by inputting a pair of equal and opposite 'limit orders' during the pre-opening period to ensure the calculated opening price would be fixed at 10,570.

An alert was issued by the regulatory surveillance system, based on the difference between a theoretical price it calculates and the opening price actually executed. Such alerts are prompted where the divergence is more than 50 points. In this case, it was 217 points.

Although he believed him to be manipulative, the magistrate found that Mr Yang, operating a discretionary account in the name of his father-in-law at Top Equity Derivatives, may not have known or believed the price to be artificial or unreasonably high.

He could thus not be sure Mr Yang intended to defraud.

The Court of First Instance subsequently heard, during the appeal from Mr Yang's barrister Graham Harris, that regulators could watch the entire process on trading screens and noted the process is 'open and transparent'.

'Regulators can see everything on the screens,' Mr Harris said, describing anyone who would deliberately try to defraud a client under these circumstances as a 'mad man'.

'It's a bit like trying to sell drugs in front of a policeman,' he said.

Mrs Justice Verina Bohkary noted in a judgment yesterday that the magistrate felt unsure that Mr Yang was dishonest or intended to defraud.

'I cannot, as an appellate tribunal, force him to feel sure on an issue of fact on which he felt unsure,' she said, upholding the previous ruling.

The judge, however, declined to reverse a decision that Mr Yang bear his costs of the legal action, saying he brought suspicion on himself.