Posted inRegulation

HK bans short-seller for five years

The Hong Kong Market Misconduct Tribunal ruled that Andrew Left, the founder of Los Angeles-based short-seller Citron Research, has to repay HK$1.6m ($206,250) of net profits from short-selling China Evergrande Group in 2012.
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He is also banned from the local market for five years, according to a ruling on Wednesday reported by Bloomberg.

The report included Left’s emailed response: “I do not believe the decision properly reflected the case. I did an extensive amount of research and am disappointed that the courts have stifled my freedom of speech — a definite step backwards for efficient markets. Yes, I plan on appealing.”

Citron’s report, published in June 2012, accused the Hong Kong-listed mainland developer of culpable of “fraudulent accounting” and was in fact “insolvent.” The stock fell 20% the same day.

The tribunal noted that Citron’s report was “false and/or misleading as to material facts or through omission of material facts”.

Citron has released more than 150 reports on its website for free in the past 14 years, targeting companies it believes have engaged in misleading practices and making a profit by short-selling them.

The firm’s website says it aims “to provide truthful information in an entertaining format to the investing public”. However, it adds that “The principals of Citron Research most [sic] always hold a position in any of the securities profiled on the site.”

The case followed Moody’s Ratings, a credit rating agency, fined and publicly reprimanded by the Securities and Futures Commission due to a 2011 report entitled “Red Flags for Emerging-Market Companies: A Focus on China”.

Left earlier said that “Citron Research has joined Moody’s as a target of HK Securities and Futures Commission sanctions for publishing opinions that we believed to be truthful, thoughtful and documented critical research.”

Moody’s also appealed.

Part of the Bonhill Group.