HKSI Paper 1 Market misconduct and improper trading practices question: approached by the placing agent for a substantial shareholder of Mingtai Holdings Ltd

HKSI Paper 1Market misconduct and improper trading practices

Jade Peak Fund is approached by the placing agent for a substantial shareholder of Mingtai Holdings Ltd, a listed company, and agrees to buy 5 million Mingtai shares in an unannounced placing of existing shares at HK$6.20. It knows nothing else about Mingtai. What is Jade Peak's position under Part XIII?

A It has a defence: it bought to accomplish the placing, holding only market information from its involvement
B It has no defence, as the market information defence is open only to the placing agent and not to placees
C It has no defence, as a placee may deal in the shares only after the placing has been announced to the market
D It has a defence only if it also signed an underwriting agreement with the vendor for the placing shares

Show the answer and explanation

Answer: A. It has a defence: it bought to accomplish the placing, holding only market information from its involvement

Section 271(8) of the SFO (criminal equivalent s.292(8)) protects a person who acted in connection with a dealing under consideration or negotiation, with a view to facilitating it, where the inside information is market information arising directly out of that involvement. Section 271(10) defines market information to include the fact that a dealing is to take place, its quantity, its price and the identity of the parties. Jade Peak knew only the placing's size, price and vendor, and bought to complete it. Nothing in s.271(8) limits the defence to the placing agent or to dealings after announcement. The underwriting-agreement defence in s.271(1)(b) is a separate defence and is not a condition of this one. Source: SFO (Cap. 571) s.271(8), (10); s.292(8), (10) (as at October 2026). Source: SFO (Cap. 571) s.245(2), s.271(8), (10); criminal equivalent s.292(8), (10) (as at October 2026).

Common mistake

Candidates think any wall-crossed buyer is automatically an insider dealer. A placee that knows only the deal's own size, price and parties can rely on the market information defence.

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