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SCMP Reporter

A STOCKBROKER at Wardley James Capel used a trading account in his mother's name to make at least $135,220 in rat-trading profits.

    Kingley Lo Kwai-wing, formerly a dealer's representative at Wardley James Capel (Securities), which is now known as Wardley Securities (HK), had his registration suspended for 15 months.

  The Securities and Futures Commission (SFC) said yesterday it had acted after an investigation into trading in 1993.

  The move is linked to a investigation into several market abuses by brokerage floor staff at Capel which was revealed in Business Post in February.

  Capel sacked six out of seven of its floor dealers after the commission produced evidence of wrong-doing.

  Mr Lo used a trading account in the name of his mother, Chui Sok-chun, to hide dishonest trades from clients and his bosses at Capel, which is owned by HSBC Holdings.

  Clients were cheated by what Mr Lo later described to SFC investigators as 'price cheating'.

   When an institutional client of Capel placed a buy order, Mr Lo would buy shares from the market throughout the day. After the market closed, he would allocate shares bought at a relatively cheap price to his mother's account and then cross the shares to Capel's client's account at a higher price.

  When a client placed a sell order, Mr Lo would sell shares on the market all day. After the close, he would allocate the shares sold at a high price to his mother's account.

   In order to cover the position, he would then carry out a cross trade between his mother's account and the Capel client account at a low price.

  Records provided by Capel showed investigators Mr Lo had been trading heavily. From January 1 to November 18, 1993, there were 349 transactions in the account in 80 different shares.

  The SFC concentrated its inquiries between November 8 and 18. In that time there were 12 trades, of which nine were day trades and which generated profits of $135,220. At least four of the day trades carried out by Mr Lo looked to SFC investigators as though they were crossed between Ms Chui's account and Capel institutional clients in a way which disadvantaged the clients.

    On February 17, Capel sacked all but one of its exchange floor traders after the commission told of dishonest trading by employees.

  'The SFC has brought to our attention certain dealing irregularities which occurred during a period up to June 1994,' Philip Gray, managing director of James Capel Asia, said at the time.

  'We believe these irregularities constituted a breach of compliance.

  'Although the SFC is continuing its inquiries, James Capel Asia has decided to take pre-emptive action. As a result, six members of staff operating from the exchange floor have left the company with immediate effect.'   The inquiry into market malpractice is believed to have netted other irregularities at other firms.

  A spokesman for the SFC refused to comment on whether any other cases linked to Capel or former Capel staff were pending.



Rat-trader suspended for cheating Capel clients