Hong Kong SFC Issues 15-Year Ban on Hedge Fund Tarascon Capital Founder & CIO Jonathan Dominic Iu Wai Ching for Market Misconduct in False Trading with His Mother on 2 Hong Kong-Listed Companies to Create Active Trading Activities, Generated $720,000 of Illegal Profits in Mother Brokerage Account at the Expense of the Hedge Fund, 2 Companies are Sinopharm Tech Holdings & Quantum Thinking
7th November 2024 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has issued a 15-year ban on hedge fund Tarascon Capital founder & CIO Jonathan Dominic Iu Wai Ching for market misconduct in false trading with his mother on 2 Hong Kong-listed companies to create appearance of active trading activities, generating $720,000 (HKD 5.6 million) of illegal profits in his mother’s brokerage account at the expense of the hedge fund. The 2 companies are Sinopharm Tech Holdings & Quantum Thinking. In 2024 July, the Hong Kong Securities & Futures Commission (SFC) Market Misconduct Tribunal (MMT) issued a 4-year ban Jonathan Dominic Iu Wai Ching and to give up HKD 5.6 million of illegal profit. Hong Kong SFC (7/11/24): “The Securities and Futures Commission (SFC) has prohibited Mr Jonathan Dominic Iu Wai Ching from re-entering the industry for 15 years (Note 1). The disciplinary action follows the Market Misconduct Tribunal’s (MMT) determination that Iu, a former responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), had engaged in market misconduct by false trading in the shares of Sinopharm Tech Holdings Limited and Quantum Thinking Limited. He carried out the trades through the brokerage accounts of the hedge fund managed by Tarascon and of his mother, resulting in gains of $5.6 million in his mother’s brokerage account at the expense of the hedge fund (Notes 2 and 3). The SFC concluded that Iu is not a fit and proper person to be licensed. In deciding the sanction, the SFC took into account all relevant considerations including: 1) Iu’s manipulative conduct, which spanned over two months, for the purpose of generating unlawful gain for his mother was serious and dishonest; 2) Iu violated the trust and confidence placed in him by his clients; and 3) a strong deterrent message must be sent to the market to deter other practitioners from committing similar conduct in the future.”
“ Hong Kong SFC Issues 15-Year Ban on Hedge Fund Tarascon Capital Founder & CIO Jonathan Dominic Iu Wai Ching for Market Misconduct in False Trading with His Mother on 2 Hong Kong-Listed Companies to Create Active Trading Activities, Generated $720,000 of Illegal Profits in Mother Brokerage Account at the Expense of the Hedge Fund, 2 Companies are Sinopharm Tech Holdings & Quantum Thinking “
Notes:
- Iu was licensed under the Securities and Futures Ordinance to carry on business in Type 9 (asset management) regulated activity. He was a responsible officer of Tarascon between 16 February 2007 and 30 September 2023. He ceased to be a licensed person and the approval for him to act as a responsible officer was revoked on 30 September 2023.
- The MMT’s decision and a report which sets out the reasons of making the relevant orders is available on the MMT’s website.
- Please see the SFC’s press releases dated 16 August 2022 and 3 July 2024.
Hong Kong SFC Market Misconduct Tribunal Issues 4-Year Ban on Hedge Fund Tarascon Capital Founder & CIO Jonathan Dominic Iu Wai Ching & to Give Up $716,000 of Illegal Profit to Hong Kong Government for False Trading with His Mother on 2 Hong Kong-Listed Companies to Create Active Trading Activities, 2 Companies are Sinopharm Tech Holdings & Quantum Thinking
5th July 2024 – The Hong Kong Securities & Futures Commission (SFC) Market Misconduct Tribunal (MMT) has issued a 4-year ban on hedge fund Tarascon Capital founder & CIO Jonathan Dominic Iu Wai Ching & to give up $716,000 (HKD 5.6 million) of illegal profit to the Hong Kong Government for false trading with his mother on 2 Hong Kong-listed companies to create appearance of active trading activities. The 2 companies are Sinopharm Tech Holdings & Quantum Thinking. Hong Kong SFC (3/7/24): “The Market Misconduct Tribunal (MMT) has ordered Mr Jonathan Dominic Iu Wai Ching, a former responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), to disgorge illicit profit of over $5.6 million from false trading and disqualified him for four years following legal proceedings brought by the Securities and Futures Commission (SFC). On 22 trading days between August and September 2014, Iu placed contemporaneous orders in the shares of Sinopharm Tech Holdings Limited and Quantum Thinking Limited through the brokerage accounts of the hedge fund managed by Tarascon and of his mother, leading to opposing orders to be executed against each other. These matched trades, which had the effect of creating a false or misleading appearance of active trading, or with respect to the price for dealings, in the listed shares, resulted in gains of $5.6 million in his mother’s brokerage account at the expense of the hedge fund. At the material time, Iu, who was responsible for managing and making investment decision for the hedge fund, was also a director, the chief investment officer, and a substantial shareholder of Tarascon. The MMT made the following orders against Iu: a disqualification order prohibiting him from being a director or involved in the management of any listed or unlisted corporation in Hong Kong for four years, effective from 28 June 2024; he is banned from dealing in securities, futures contracts, leveraged foreign exchange contracts or collective investment schemes in Hong Kong for four years, effective from 28 June 2024; he is not to engage in any conduct which constitutes market misconduct; he is to pay to the Government the sum of $5,617,540 being the amount of profit gained by Iu as a result of his market misconduct; and payment of the SFC’s investigation and legal costs, as well as the costs of the MMT proceedings.”
Notes:
- Please see the SFC’s press release dated 16 August 2022.
- The two companies are listed on GEM of the Stock Exchange of Hong Kong Limited. At the material time, Sinopharm Tech Holdings Limited was known as China Vanguard Group Limited, and Quantum Thinking Limited was known as Yunbo Digital Synergy Group Limited.
- The MMT’s decision and a report which sets out the reasons of making the relevant orders is available on the MMT’s website.
- Under section 257(1)(a) of the Securities and Futures Ordinance (SFO), an order prohibiting a person to take part in the management of any listed or unlisted company in Hong Kong without the leave of the Court of First Instance.
- Under section 257(1)(b) of SFO, an order has the effect of prohibiting a person who is the subject of the order from any dealings, directly or indirectly, in the Hong Kong financial market for the length of the order.
- Under section 257(1)(c) of the SFO, an order to prohibit a person who is the subject of the order not to engage in any form of market misconduct in future.
- Under section 257(1)(d) of the SFO, an order that the person shall pay to the Government an amount not exceeding the amount of any profit gained or loss avoided by the person as a result of the market misconduct in question.
- Under sections 257(1)(e) and (f) of the SFO, orders that a person shall pay to the Government and the SFC for the costs and expenses reasonably incurred.
Hong Kong SFC Starts Market Misconduct Proceeding Against Founder & CIO of Hedge Fund Tarascon Capital for False Trading with Mother on 2 HK Listed Companies to Create Active Trading Activities
18th August 2022 – The Hong Kong Securities & Futures Commission (SFC) has commenced market misconduct proceeding against hedge fund Tarascon Capital Management founder & CIO Jonathan Dominic Lu Wai Ching for false trading of 2 Hong Kong-listed companies. In 2014, Jonathan had executed matched trades between the brokerage accounts of the hedge fund (Tarascon Capital Mgmt) and his mother, creating misleading appearance of active trading and affecting the share price. Tarascon Capital was established in 2007 by Jonathan (Founder & CIO) to manage an Asia-Pacific equity long/short strategy. The HK SFC instituted proceedings in the Market Misconduct Tribunal (MMT) against Jonathan for market misconduct under section 274 of the Securities and Futures Ordinance (SFO). A copy of the SFC’s Notice of the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk). Tarascon is licensed under the SFO to carry out Type 9 (asset management) regulated activity.
Market Misconduct Tribunal (MMT)
The Tribunal is an independent body which is established under the Securities and Futures Ordinance, and is chaired by a judge or former judge of a High Court who sits with two members. Market misconduct includes insider dealing, false trading, price rigging, stock market manipulation, disclosure of information about prohibited transactions and disclosure of false or misleading information inducing transactions in securities and futures contracts. Such conduct is detrimental to the interests of investors and damages the reputation of Hong Kong as an international financial centre. In accordance with the Securities and Futures Ordinance (Cap. 571) (“SFO”), if it appears to the Securities and Futures Commission (“SFC”) that market misconduct or a breach of a disclosure requirement under Part XIVA of the SFO has or may have taken place, the SFC may institute proceedings before the Tribunal. The Tribunal conducts civil proceedings and, where appropriate, imposes civil sanctions against those it determines to be wrongdoers. It helps promote market confidence by protecting the interests of the investing public and reducing market malpractice.
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