HONG KONG: SFC Reprimands and Fines Optimas Capital Limited $1.05 million for Short Position Reporting Failures

Thursday April 15 2021

The Securities and Futures Commission (SFC) has publicly reprimanded and fined Optimas Capital Limited (Optimas) HK$1.05 million pursuant to section 194 of the Securities and Futures Ordinance (SFO).

The disciplinary action is taken in respect of Optimas’ failure to ensure the short position reports (SPRs) it prepared and submitted to the SFC between 23 June 2017 and 9 July 2018 (Relevant Period), in relation to a collective investment scheme (CIS) under its management, were accurate and compliant with the requirements under the Securities and Futures (Short Position Reporting) Rules (SPR Rules).

During the Relevant Period, a total of 350 reportable short positions held by the CIS have been omitted from 56 SPRs submitted by Optimas to the SFC.

These errors in the SPRs occurred as a result of a programming mistake (Mistake) in a script (Script) created to automate the process of identifying short positions held by the CIS in order to filter out those that were reportable.

In particular, the reporting criteria in the Script had mistakenly been set as below the 0.02% Threshold (instead of equal to or above the 0.02% Threshold as stipulated by the SPR Rules). This led Optimas to have reported all net short positions in specified shares held by the CIS that were equal to or above HK$30 million in value and/or below the 0.02% Threshold, while failing to include in the SPRs short positions that were equal to or above the 0.02% Threshold, throughout the Relevant Period.

Regulatory Requirements regarding SPRs

Under rules 4(1) and 4(2) of the SPR Rules, a person who has a reportable short position in any specified shares at the close of trading on The Stock Exchange of Hong Kong Limited on the last trading day of each week must notify the SFC of the position within two business days.

Rules 3(1) and 3(2)(b) of the SPR Rules further stipulate that a person has a reportable short position if the net short position value the person holds in a specified share is equal to or more than the lower of (i) HK$30 million; and (ii) 0.02% of the value of the total number of the specified shares issued (0.02% Threshold).

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