Supplementary Question on Legislative Council Meeting – Regulation of Short Selling Activities

MR CHAN CHUN-YING (in Cantonese):

President, first of all, on behalf of the financial sector, I would like to thank Secretary Prof CHAN for his contribution in finance.   I hope that after Secretary Prof CHAN moves to another platform,
he will continue to promote the development of Hong Kong’s economy and finance.

With regard to the activities of short selling institutions, the Bureau pointed out in its response that SFC’s investigations focus on whether there has been any manipulative trading or naked short selling, and whether the short seller report contained any materially false or misleading statements.   However, if the short seller report seems plausible, SFC would adopt an open-minded attitude in
investigating whether the listed company concerned has issued false or misleading information. In order to illustrate if the short seller reports published by short selling institutions can uncover any problem, can the Bureau inform us how many investigation SFC has carried out against listed companies based on those short seller reports? Has any prosecution been instituted to facilitate the judgment of investors on the accuracy of these reports?



I thank Mr CHAN for his question and appreciation.

This is indeed a very good supplementary question, and that is, if SFC carries out an investigation based on a seemingly plausible short seller report, can it disclose certain information to inform people if the reports are substantiated? The Member has put a very good question, but I believe in the course of an investigation, SFC will collect evidence and information from different sources.
In that case, it would be very difficult and also inappropriate for SFC to disclose details of the investigation. SFC would look into the matter basing on the evidences collected from various sources, but some of them may only be preliminary findings and is therefore inappropriate to make public details of the investigations. Notwithstanding that, I do understand the crux of this supplementary question.   I believe if more studies on the market can be carried out, then regardless of whether the findings are positive or negative, investors will be better informed, which is conducive to the healthy development of the market.