According to reports, at the Asian Securities Industry and Financial Markets Association (ASIFMA) compliance seminar, Wei Jianxin, executive director of the Law Enforcement Department of the Hong Kong Securities Regulatory Commission, said that at present, the Hong Kong Securities Regulatory Commission has formulated long-term and short-term measures to deal with the "high bulk" behavior. Where feasible, the SFC will take action to freeze securities accounts suspected of being involved in fraud. More than 100 local securities accounts in Hong Kong have been frozen last year, involving more than HK $900m.

It is understood that on June 29, the Hong Kong Securities and Futures Commission said that recently there have been more and more activities that are obviously manipulating the market (especially the increasing number of suspected "singing high bulk cargo" scams). These activities are usually carried out on popular social media platforms, and curbing "singing high bulk" scams is a major focus of the SFC's law enforcement work. Among the market manipulation cases investigated by the Hong Kong Securities and Futures Commission, the percentage of "singing high bulk cargo" cases is very high. The investigation also found that the "singing high bulk cargo" case may involve well-organized and highly coordinated criminal syndicates.

一、What is "singing high bulk cargo"?

The so-called "singing high bulk" is often some stocks with small market capitalization, low stock prices and poor performance, which rise strangely or even suddenly soar over a period of time, in line with the advocacy of recommended stocks "teachers" on various social media. After rising to a certain extent, the volume suddenly plummeted, so that the retail investors who were "tricked" into it lost all their money.

This kind of "singing high bulk cargo" is the so-called "pig-killing plate" of A-shares. The role behind the crime is divided into the banker behind the scenes and the "teacher" who recommends shares to stock investors in front of the stage. In some scams, there is also a "little sister" who draws people into the recommended stock group. The media call it "Wechat girl".

Since the beginning of this year, there have been a number of suspected "high bulk" cases in the Hong Kong stock market.

For example, the share price of Shengxing Holdings, a company listed on the Hong Kong main board, fell 30% in late trading, with a volume turnover of 120 million shares. On June 8, the company's share price plummeted 64% at the start of trading, Shengxing Holdings was urgently suspended, and trading in the shares was temporarily suspended from 09:36. The share price fell more than 64% before the suspension and 75% in two days.

Before the slump, investors said in the forum that Shengxing Holdings was going to dive, "kill the pig plate, dive next Monday."

Investors said in a post on the forum that the stock was recommended by a "Wechat woman", an online fraudster who fraudulently recommended shares through WeChat groups and other social media. The price for the Wechat woman's recommendation was HK $1.10.

According to the transaction data before the company's flash crash, there is a huge amount of money to buy around 1.1. it is easy to buy 300000 shares and 800000 shares, which is an obvious mark of killing pigs.

In addition, some "pig killing plates" are related to IPO.

In the past, Hong Kong stocks had the so-called "shell listing" for a long time, that is, selling shells or recommending stocks to kill pigs after listing. After the listing of many low-market capitalization companies, they have been reduced to the target of "killing pigs", so that many small and medium-sized investors have lost all their money. The Hong Kong Securities and Futures Commission has pointed out that some initial public offerings "may only meet the initial listing requirements in an unreal way", that is, listing is to recommend shares and kill pigs in the future, purely for the purpose of fraud.

Earlier, some investors questioned Yuqin Holdings, which was listed in December 2020. The stock was listed on December 7, 2020. in dark trading the day before the listing, Yuqin Holdings offered HK $0.295 as of the close, up 31.11% from HK $0.225.

On the first day of listing, Yuqin Holdings fell 14.67%, with the highest intraday rise of 122.22%, a full-day amplitude of more than 140%, and a turnover of as much as HK $360 million.

二、The number of criminal prosecutions by the SFC increased by 500% in the second quarter compared with the same period last year.

A few days ago, a work report released by the Hong Kong Securities Regulatory Commission showed that in the second quarter of this year, the number of ongoing investigations reached 62, an increase of 87.9% over the same period last year, an increase of 17% over the first quarter; a total of 18 criminal prosecutions have been instituted, an increase of 500% over the same period last year; the number of cases in which search warrants have been executed is 20, an increase of 900% over the same period last year.

Combing through public reports, we can see that the SFC has made efforts in three areas since the beginning of this year:

1. Step in to crack down on illegal listed companies

In the second quarter, the number of inquiries launched by the Hong Kong Securities and Futures Commission on fraud or other misconduct related to listed companies increased by 50% compared with the same period last year. The number of instructions issued on market misconduct, fraud, misconduct and disciplinary misconduct increased by 96.7% year-on-year.

如：

China Medical Network and its six former and current directors were fined HK $4.2 million for failing to disclose inside information as soon as reasonably practicable. Former executive director Wang Bingzhong and current executive director Jiang Muxian were banned from serving as directors of listed companies for 8 months and 6 months respectively. The directors concerned are also required to attend training courses on directorship and corporate governance approved by the SFC.

Zheng Zee, former executive director, chief financial officer and company secretary of ENN Energy, was disqualified from serving as a director of a listed company or participating in the management of a listed company for insider trading in the company's shares, and was banned from dealing with any securities in Hong Kong for 54 months. Zheng Zee also needs to hand over insider trading to make a profit of HK $2.95 million.

In early July, the SFC and the ICAC conducted a joint operation to search for crimes related to suspected "exaggerated bulk" market manipulation and other market misconduct, arresting a senior executive of a listed company and searching the office of the company and the office of an underwriter employed by IPO.

On August 27, the SFC and the Commercial Crime Bureau of the Hong Kong Police Force launched a joint operation against a Hong Kong listed company and its former senior staff suspected of committing a series of corporate fraud-related crimes involving a total of HK $450 million. During the operation, two persons, aged 53 and 61, were arrested for conspiracy to defraud, theft and money laundering.

2. Crack down on the crime of sitting in the village.

On 10 February, the Securities and Futures Commission (SFC) reminded the public to beware of online investment scams through a short film jointly produced by the Securities and Futures Commission and the Anti-Fraud Co-ordination Centre of the Hong Kong Police Force (HKPF). The short film reminds investors to beware of fraudsters "setting up investment groups on social media platforms and claiming to provide stock tips or inside information." "

On March 5, the police and the Hong Kong Securities and Futures Commission jointly launched a joint operation codenamed "combination" to crack down on the "singing high bulk cargo" syndicate. The Hong Kong police deployed more than 160 people to search 27 target locations throughout the territory, including the suspect's luxury homes in the Peak, Central and Wan Chai districts, as well as securities firms involved in the case on Hong Kong Island. A total of 12 people were arrested.

In April, the SFC and the police jointly searched the office of a Hong Kong listed company and the residence of its senior staff on suspicion of "exaggerating the bulk" market manipulation scheme and fraud. Police arrested four people, including three senior executives of the company.

3. Strict supervision of intermediary institutions

The Hong Kong Securities Regulatory Commission has put forward higher requirements for intermediary institutions such as investment banks and securities firms.

In the second quarter, the SFC made 2319 requests for trading and account records from intermediaries after monitoring changes in stock prices and trading volume. As for IPO, while evaluating listing applications more strictly, the SFC stressed that it would step up monitoring of institutions involved in IPO bookkeeping, filing and placement activities, conduct in-depth inspections of those institutions involving problematic newly listed companies, and take enforcement actions against any misconduct involving IPO.

In the second quarter, a number of investment banks, brokerages and individuals were punished by the Hong Kong Securities Regulatory Commission. After IDS Forex HK Limited's sole shareholder, Kim Sunghun, was convicted in South Korea of illegal fund-raising and fraud, the SFC revoked the company's licence and banned its former co-chief executive Zheng Yuman and Ki Bonggan from rejoining the industry for life.

Lin Changnian of Zhiyi Oriental Securities Co., Ltd. suspended his license for 7.2 months for failing to perform his duties as head and executive of the company.

In early August, UBS AG and UBS Securities Asia (UBS Securities Asia Limited) were condemned and fined HK $11.55 million for violating a number of regulatory regulations.

4. Tighten IPO review

On May 20, the HKEx announced plans to adjust the listing conditions on the main board. In addition, the HKEx and the SFC issued a joint statement that will further crack down on misconduct in the IPO market. According to the revised profit increase, the profit attributable to shareholders of applicants for listing on the main board during the three-year business record period must meet the following minimum requirements: no less than HK $35 million in the most recent financial year; and not less than HK $45 million in the previous two financial years (the cumulative profit in the three years is not less than HK $80 million).

On May 20, the HKEx and the SFC issued a joint statement announcing that they would further crack down on misconduct in the IPO market. The Chief Executive Officer of the Securities and Exchange Commission, Mr Alder Alder, said, "the Joint statement shows that we are determined to crack down on market misconduct of newly listed companies, and if there are early warning signs that not enough investors are really interested in an IPO, we will not hesitate to take action. "

Starting from the second quarter, the SFC said that it would strengthen its cooperation with the Hong Kong Stock Exchange to crack down on misconduct and misconduct involving the listing of new shares, and strictly review the valuations of listing applicants and assess compliance with the minimum market capitalization and other initial listing requirements. Once the SFC and HKEx are aware of the early warning signs that there are not enough investors who are really interested in certain listing applications, they will step up scrutiny of problematic listing applications and oppose or reject such applications if necessary.

The SFC named some IPO projects as a cover, such as allocating shares to controlled allotments at a propped share price to meet the minimum market capitalization requirement of HK $500m in the main board listing rules, or to pave the way for future manipulation of the shares, the so-called "high bulk" (higher share price shipping) scheme.