Short-seller Andrew Left launches second appeal against trading ban in Hong Kong
- The two-day hearing will take place at the Court of Appeal of Hong Kong from January 30
- Lawyer representing Andrew Left said case has ramifications for free speech
American short-seller Andrew Left, head of Citron Research, has launched a second appeal against a ruling by the Market Misconduct Tribunal for publishing a false report on Evergrande Real Estate Group in 2012, according to his lawyer Timothy Loh.
The hearing will take place at the Court of Appeal of Hong Kong on January 30 and 31, Loh told the Post.
The significance of the case is that it marks the first legal action of the Securities and Futures commission against a short seller with ramifications for free speech, Loh said.
“The market represents the consensus opinion of its participants. These opinions are not only based solely on information from the company itself but also act as a check on the quality, completeness and truthfulness of that information,” Loh said in a statement.
“Because companies have a monopoly on the dissemination of information about themselves, any judicial decision which restricts market participants from expressing their opinions freely as to the quality and meaning of such information impairs the ability of the market to regulate company disclosures,” Loh said.
The SFC investigation found that Left made a profit of about HK$1.7 million (US$216,737) by shorting 4.1 million Evergrande shares before issuing a scathing report on the company on June 21, 2012.
Short sellers sell borrowed shares and then buy them back at lower prices, pocketing the difference. They find holes in the books of listed firms and then rely on securities traders and the media to spread the word.
Left was banned from trading on the city’s stock market for five years and ordered to repay HK$1.6 million in trading profits and about HK$4 million in legal expenses, following a ruling by the Market Misconduct Tribunal in August 2016.
Shares in Evergrande slumped as much as 19.6 per cent following the release of the Citron Research report on June 21, 2012, which alleged fraudulent accounting and other malpractices in an attempt to cover up insolvency. The share closed the day down 11.4 per cent, against a 1.3 per cent drop in the Hang Seng Index.
The company, which has since been renamed China Evergrande Group, denied the claims made by Citron Research.
A previous application by Left to appeal against the ruling was rejected by the Court of Appeal in January 2017.
“The Court of Appeal said that Left’s application was made out of time and that, even if the application were within time, it had no reasonable prospects of success and was wholly without merit,” the SFC said in a statement.
Barristers Laurence Li Lu-jen and Gerard McCoy will represent Left at the appeal. A spokesman for the SFC declined to comment.
