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Question 1 (30 marks) Mr. David Zen is an investment banker working for the Hong Kong branch of a U.S. based international bank. He is an expert in advising transactions of cross-border mergers and acquisitions. In 2018, he was appointed by a listed company called Sino-X Technologies Ltd. (Sino-X) in acquiring a technology company specialized in Artificial Intelligence. This new venture was expected to introduce a new product to drastically enhance video-conferencing communication in a virtual reality setting which would bring in a substantial amount of recurring incomes from this new venture through a monthly subscription plan. They were about to sign an agreement on this important acquisition by Sino-X in the near future. This initiative was going be announced to the public at the beginning of December 2019. Such news once released to the public would be expected to be very sensitive information to the stock price of Sino-X, a company listed with the stock exchange. During a family dinner gathering in November 2018, David shared this unreleased news to his cousin and suggested good prospect of this acquisition. His cousin, Carol Chan, subsequently acquired 200,000 shares from the stock market one week before the announcement at an average price of $11.13. By mid-December 2019, all of these shares were sold by Carol at an average price of $19.20. SFC received an anonymous complaint about this market misconduct and decided to hire an independent consultant to conduct an investigation to find out if Mr. David Zen has committed any wrong doing under SFO. (a) Given the above summary of evidence, explain how the above activities by Mr. Zen constitute an insider dealing under SFO. (20 marks) (b) If Mr Zen is convicted by the court for insider dealing, identify the range of sanctions that could be imposed upon him. (10 marks)