A crime in one market is a selling point in another

PUBLISHED : Tuesday, 19 July, 2011, 12:00am
UPDATED : Tuesday, 19 July, 2011, 12:00am


Our report last week that bogus accounting firms were operating in the city does not appear to be the end of the story. There are now reports that fraudsters claiming to be representatives of the stock exchange are out and about.

The scam was unveiled last Thursday when a mainland couple went to the office of Hong Kong Exchanges and Clearing saying someone who claimed he was an authorised representative of the bourse had sold them an investment agreement written in simplified Chinese.

The conman further claimed he had long experience investing in the Hong Kong market.

The fraudster had a fake staff card and the 'investment agreement' had the HKEx logo on it. Most importantly, the fraudster claimed he has inside information on what stock would rise based on non-published information from certain companies and that he could trade these shares for investors. The couple were cheated of about 300,000 yuan (HK$363,400).

Insider dealing is a serious commercial crime in Hong Kong and penalties include jail and fines. Across the border on the mainland, however, it is amazing to see the different attitude and fraudsters use insider dealing as a selling point to lure investors into their trap.

There, fraudsters can easily disappear never to be found. It is no surprise that the couple had to come to Hong Kong to seek help from the HKEx and find out they were cheated. Both the HKEx and the couple have reported the case to the Hong Kong police. The exchange also reported the matter to the Securities and Futures Commission and the China Securities Regulatory Commission. There are fears more people may be cheated in this scam.

White Collar has learnt that the exchange this week will do more to spread the news to the mainland media and alert investors that its does not have representatives in China raising funds from investors.

This is not the first time the exchange has been used by fraudsters to make money. In 1997, a conman impersonating the then listing division head Lawrence Fok Kwong-man phoned directors at unsuspecting Hong Kong firms in an attempt to swindle them out of hundreds of thousands of dollars. The conman began by discussing company-related issues, but moved on to personal money worries before requesting that funds be sent to an account at a mainland bank.

In 1994, the exchange announced that a conman was impersonating then exchange listing head, Herbert Hui Ho-ming, and the then stock exchange chief executive Paul Chow Man-yiu to ask for money from senior executives of listed companies. At least one victim had been cheated out of HK$300,000.

The exchange publicly stated that under no circumstances would its senior executives accept any advantage from listed companies.