Hong Kong Police Probe Mercantile Exchange at SFC Request, which said it found “serious” suspected financial irregularities at the shuttered commodities market.

Hong Kong Police Probe Mercantile Exchange at SFC Request

Police began probing the Hong Kong Mercantile Exchange Ltd. at the request of the Securities and Futures Commission, which said it found “serious” suspected financial irregularities at the shuttered commodities market.

The financial regulator started its own investigation on May 15 and then referred the matter to Hong Kong Police’s Commercial Crime Bureau, according to a statement published on the SFC’s website yesterday.Barry Cheung, chairman of HKMEx, who headed the 2012 election campaign for the city’s Chief Executive Leung Chun-ying, asked for and was granted a leave of absence from his public-service appointments, which include the Executive Council, the city Cabinet, the government said on its website yesterday. Cheung made the request because of the police investigation, it said.

The exchange stopped trading and handed back its operating license because revenue wasn’t sufficient to support running costs, the SFC said on May 18. Cheung is the largest single shareholder in the exchange, with a 56 percent stake, according to Hong Kong’s Ming Pao newspaper.

The SFC said it delayed informing the exchange or the public about its findings “pending further steps in the investigation,” which have now been taken. The regulator said it will continue its probe in cooperation with the CCB. HKMEx didn’t answer a call seeking comment after office hours.

‘False Instrument’’

Separately, Hong Kong police said yesterday they are investigating, on referral by the SFC, a suspected case of “using a false instrument” involving a commodities company. Police said in a statement that they arrested a 55-year-old man surnamed Dai and were detaining him overnight for inquiries.

The statement didn’t say whether the matter is tied to the investigation at the Mercantile Exchange. Spokesmen for the government and the police declined to provide further details.

The closing of trading positions on the exchange went smoothly and is now complete, the SFC also said yesterday. LCH.Clearnet Group Ltd., the London-based clearinghouse, has started returning collateral to clearing members, the markets regulator said.

To contact the reporter on this story: Joshua Fellman in New York at jfellman@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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