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Case Studies
Company interests vs. client interests
Eddie is a director of a financial group which engages in businesses of securities and futures, asset management and corporate finance. Recently, his company is appointed as an underwriter of a placement deal for Small World Corporation.
Because the share price offered is not particularly attractive, Eddie is a little worried that the stocks of Small World Corporation cannot be fully subscribed by investors in the market and this will force his company to acquire the remaining portion. Therefore, he instructs Jacob, a fund manager in the asset management division, to purchase a substantial amount of the stocks for his discretionary clients.
Case Analysis
On this issue, Eddie should refrain from influencing Jacob to subscribe for the shares of Small World Corporation or, alternatively, disclose to Jacob’s clients the material interest of the company in this transaction. However, Eddie errs by aiming only to evade the final responsibility of his company in buying the portion of stocks which cannot be absorbed by the market. He has thus violated the *Codes of Conduct. On the other hand, Jacob should not act in accordance with Eddie’s instruction unless the subscription is in line with the investment objectives of his clients. He has breached the Fund Manager Code of Conduct in not performing his fiduciary duty.
*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.