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VST Holdings chairman convicted of price rigging

On 22 October 2012 (following an 8 day trial in the District Court, in September 2012), the chairman of VST Holdings Limited (VST), Mr Li Jialin ("Li"), was convicted of 10 counts of price rigging and 16 counts of failing to disclose his interest in VST shares.

Li had pleaded not guilty to the 11 counts of price rigging and was acquitted of one count. He pleaded guilty to 16 charges of failing to disclose the extent of his interest in VST shares, as required by the Securities and Futures Ordinance ("the SFO"). Li had been charged under sections 296 and 341 of the SFO.

Under section 296 of the SFO, price rigging arises when a transaction of sale or purchase of securities does not involve a change in beneficial ownership of those securities and has the effect of maintaining, increasing, reducing, stabilizing, or causing fluctuations in the price of securities traded. The transaction does not have to be intentional and recklessness as to the effect of the transaction is sufficient.  It is a defence for the defendant to prove that the purpose for which the securities were sold or purchased was not (or where there was more than one purpose, the purposes did not include) the purpose of creating a false or misleading appearance with respect to the price of securities. The maximum penalties for price rigging are a fine of HK$10,000,000 and 10 years imprisonment on indictment or a fine of HK$1,000,000 and 3 years imprisonment on summary conviction.

Under section 341 of the SFO, a director or chief executive of a listed corporation comes under a duty of disclosure upon the occurrence of certain events, including any change in his interests in shares in the listed corporation or any associated corporation.  Maximum penalties for failing to comply with this section are a fine of HK$100,000 and 2 years imprisonment on indictment or a fine of HK$10,000 and 6 months imprisonment on summary conviction, under section 351 of the SFO.

In Li's case, the Court heard that, between August 2007 and January 2008, Li operated three different accounts, one in his own name, another jointly with his wife and a third in his brother's name, through which he bought and sold VST shares, in transactions that involved no change in the beneficial ownership of those shares. The Court found that these transactions had the consequence of increasing the price of VST shares.

On 31 October 2012, the District Court sentenced Li to six months imprisonment and fined him HK$240,000 for price rigging and failing to disclose his interest in VST shares. He was also ordered to pay HK$168,282 investigation costs to the Securities and Futures Commission. Li was also disqualified from being a director of a listed company for one year and, as a result, will have to relinquish his positions as chairman and director of VST.


This is the first time that a listed company chairman has been convicted of a market manipulation offence since the SFO came into effect on 1 April 2003.  If you would like to know more about what constitutes price rigging or other market misconduct, please feel free to contact us.

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