Monday, September 19, 2011

Oasis and CIO Seth Fischer Receive Record Fine for JAL Trades

Today SFC publicly reprimanded Oasis Management (Hong Kong) LLC and its Chief Investment Officer, Mr Seth Hillel Fischer, and fined each of them $7,500,000 for their trading in the shares of Japan Airlines Corporation (JAL) on the Tokyo Stock Exchange (TSE) in 2006.

This disciplinary action relates to trading by Oasis in JAL shares on the TSE on 19 July 2006 on behalf of two investment funds after JAL announced a plan to issue new shares via a public offer.  Under JAL’s plan, the offering price for the new shares would be priced between 90%-100% of the closing price of JAL’s shares on one of the days from 19 July 2006 to 21 July 2006.  This type of pricing mechanism is common in the Japanese market and usually the offering price determination day is the first day of the selected range which was 19 July 2006 in this case.

Oasis entered a series of orders for JAL shares in the last 15 minutes before the market closed on 19 July 2006, including:

  • market-on-close buy orders and cancelling them subsequently; and
  • a large volume of short sell orders during the last five minutes before market closed on the TSE (some orders were incorrectly labelled as short sell exempt orders, such that the funds were able to enter sell orders at prices lower than the latest executed prices).
On the settlement day for the short sell orders, Oasis failed to deliver shares in nearly 70% of the shares they had short sold with approximately 50% of these transactions having to be covered by new shares issued by JAL in the public offer.

Oasis' trading strategy, which originated in Hong Kong and was executed by Fischer, appeared to have been designed to drive down the closing price of JAL on 19 July 2006 to the detriment of the market for JAL shares.  A lower closing price would benefit the funds as subscribers for the new shares.

Oasis and Fischer do not admit their strategy was designed to mislead the market for JAL shares.  However, they have agreed to accept these sanctions which SFC regards as a sufficient expiation for SFC's concerns about their conduct on 19 July 2006.

This was actually a market manipulation case happened in Japan, referred by Japanese Securities and Exchange Surveillance Commission to SFC for cross-border enforcement.

Seth Fischer has launched a new fund which started trading on 20 Sept -

Oasis was recently also in the news in regards to its disposal of its interests in AIM listed Japan Leisure Hotels

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