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Case Studies
Taking advantage of official position for personal dealing
Robert is a fund manager of an international asset management company, who manages the provident funds for certain large corporations. One day, he receives a research report from an analyst stating that the profit margin of Hydroplane is expected to be high in the forthcoming three years.
Robert, therefore, plans to buy a substantial amount of Hydroplane’s shares for his provident funds portfolios. Knowing that such a bulk purchase will likely boost its share price, he decides to place an order for himself through an external broker before sending out the purchase instruction to the dealing room for his provident funds portfolios.
Case Analysis
Robert contravenes the *Codes of Conduct by knowingly dealing in the same securities for himself before he executes transactions for the portfolios under his management. Moreover, he is also in breach of the Fund Manager Code of Conduct as it prohibits a fund manager from buying or selling any stocks on a day in which he or other fund managers in his company has a pending "buy" or "sell" order in the same stocks until such order is executed or withdrawn. Robert’s action actually amounts to front running.
*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.