Hong Kong regulator warns over suspected rule-breaking on growth market

HONG KONG (Reuters) - Hong Kong’s securities regulator and stock exchange on Friday jointly warned market participants they would crack down on suspected rule-breaking with respect to listings and share placements on the bourse’s Growth Enterprise Market (GEM).

The Securities and Futures Commission (SFC) and the Hong Kong Exchanges and Clearing said they had identified a number of instances in which shares had been placed with a small number of shareholders and that this concentration of ownership had led to extreme volatility among some stocks on the GEM.

The average first-day price gain was 743 percent for GEM stocks listed in 2015 and 454 percent for those listed in the first half of 2016, the SFC said.

“The SFC or the exchange will, where appropriate, take action against applicants, sponsors, underwriters or placing agents who fail to have appropriate policies and procedures in place to ensure the placing is conducted in a fair and orderly manner,” the regulator said in a statement.

Reporting by Michelle Price; editing by Jason Neely