HKSI Paper 6 Misconduct question: shares of a small listed company on the Exchange at a price above the last trade

HKSI Paper 6Misconduct

Through two broker accounts held for the same fund, Celia Ho sells and buys 400,000 shares of a small listed company on the Exchange at a price above the last trade. The fund's beneficial ownership never changes, and the share price rises. Which statement is correct?

A This cannot be market misconduct, because transfers between accounts of the same fund are internal bookkeeping
B This is price rigging only if the SFC proves that she intended to induce other investors to buy the shares
C This cannot be price rigging, because each trade was executed on the Exchange at a price that the market itself accepted
D This is price rigging unless she establishes that creating a false appearance about the price was not one of her purposes

Show the answer and explanation

Answer: D. This is price rigging unless she establishes that creating a false appearance about the price was not one of her purposes

Price rigging includes entering into a sale or purchase of securities that involves no change in beneficial ownership and has the effect of maintaining, increasing, reducing, stabilising or causing fluctuations in the price of securities traded on a recognized market (s.275(1)(a)). No intention needs to be proved for this limb; the person escapes only by establishing that creating a false or misleading appearance about the price was not among the purposes (s.275(4)). On-exchange execution is no answer, an intention to induce others belongs to stock market manipulation (s.278), and the trades are real market transactions, not bookkeeping. The same trades are also presumed false trading (s.274(5)(a)). Source: SFO (Cap. 571) s.274(5)(a), s.275(1)(a), (4), s.278 (as at October 2026).

Common mistake

Expecting the SFC to prove intent. For a wash sale that moves the price, the burden shifts to the person to establish an innocent purpose.

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Study note: Misconduct: market misconduct, unsolicited calls and improper trading by fund managers HKSI Paper 6 practice questions & mock exams

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Original study material mapped to the public HKSI Paper 6 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.