The Hong Kong Securities and Futures Commission has obtained a court's first-ever criminal conviction ruling on securities fraud through illegal short selling.

According to news from the Securities and Futures Commission of Hong Kong on February 27th, the Eastern District Court of Hong Kong today ruled that unemployed individual investor Yang Dexin (female) admitted to the securities fraud charge of illegal short selling. The court found her guilty and the relevant legal procedures were initiated by the Securities and Futures Commission of Hong Kong. This is the first conviction under Section 300 of the Securities and Futures Ordinance in a case involving illegal short selling, for Yang Dexin's fraudulent intent in trading securities using a fraudulent scheme. The case originated from an investigation into a "pump and dump" case, where the Securities and Futures Commission of Hong Kong found that Yang had engaged in a fraudulent scheme, thus committing the offense. The case details that on May 28, 2020, Yang Dexin submitted a settlement instruction form to her broker, Yalituo Securities Limited, with the intention of showing that she held 15 million shares of Aoba China Group Limited (Aoba) listed on the Hong Kong Stock Exchange through another broker, when in fact she did not hold such shares. The broker was deceived and allowed Yang Dexin to short sell Aoba shares before the claimed transfer of shares settlement. Yang Dexin did not hold any shares when submitting the settlement instruction form and short selling Aoba shares. After illegally short selling Aoba shares, Yang Dexin proceeded to buy the same number of shares at a lower price in order to cover her short position on the same day. As a result, she gained approximately RMB 602,600 in illegal profits. The Securities and Futures Commission of Hong Kong reminds intermediaries of their responsibility to implement and maintain appropriate measures, comply with regulations regarding short selling, and be alert to warning signs of clients engaging in illegal short selling.