SEC Charges Hong Kong Investment Adviser with Violating Trading Rule

ADMINISTRATIVE PROCEEDING
File No. 3-22372

December 19, 2024 - The Securities and Exchange Commission today announced settled charges against Snow Lake Capital (HK) Ltd., an investment adviser based in Hong Kong SAR China, for violating an SEC trading rule by purchasing equity securities on behalf of its advisory clients from an underwriter or broker-dealer participating in a follow-on offering, after selling short the same securities days before.

The SEC's order finds that Snow Lake violated Rule 105 of Regulation M of the Securities Exchange Act of 1934, which prohibits short selling an equity security during a restricted period, generally five business days before a covered public offering, and then purchasing the same security in the offering, absent an exception. Rule 105 applies regardless of the trader's intent and is designed to prevent potentially manipulative short selling before the pricing of covered secondary offerings of securities. The SEC's order finds that Snow Lake violated Rule 105 by participating in five covered offerings of securities in 2020 and 2021, after it had sold short the same securities during the restricted period.

Without admitting or denying the findings in the SEC's order, Snow Lake agreed to cease and desist from committing or causing violations of Rule 105, and to pay disgorgement of $1,843,582, prejudgment interest of $391,858, and a civil money penalty of $525,000.

The SEC's investigation was conducted by Hannah Cho and supervised by Ruth Hawley and Jason H. Lee of the San Francisco Regional Office, with assistance from Wendy Kong of the Office of Investigative and Market Analytics. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.