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Hong Kong – Recent Enforcement Actions And Penalties Involving HKEx-Listed Companies.

16 December, 2014

 

 

  • The SFC commenced proceedings in the Hong Kong Court of First Instance against Mr. Tong Shek Lun (Mr. Tong) and two former executive directors of Sinogreen Energy International Group Limited (Sinogreen) seeking that all three be disqualified as acting as directors and be required to pay compensation to Sinogreen for the loss allegedly caused by their misconduct. Sinogreen had disposed of a subsidiary business to a third party at a price that represented a loss on investment to Sinogreen. Mr. Tong had received a secret profit of US$1 million from the purchaser to facilitate the transaction that was not disclosed to shareholders of Sinogreen. The two other executive directors allegedly failed to make full and proper inquiries about the disposal before approving it.
  • The freezing order over 107,290,000 shares in HKEx-listed Hisense Kelon Electrical Holdings Limited obtained by the SFC has been extended. The SFC alleges that the shares are held for the benefit of Mr. Gu Chujun (Mr. Gu), the former chairman and CEO of HKEx-listed Greencool Technology Holdings Limited (Greencool). Mr. Gu and other members of Greencool senior management are the subject of ongoing proceedings under Section 213 of the Securities and Futures Ordinance in relation to alleged gross overstatements of the financial position of Greencool. The Market Misconduct Tribunal (MMT) hearing is set to take place in September 2015.
  • The SFC has obtained a disqualification order in the High Court of Hong Kong against Mr. Norman Ho Yik Kin (Mr. Ho), a former executive director of Tack Fat Group International Limited, now known as Tack Fiori International Group Limited (TF). Mr. Ho admitted to neglecting his duties as a director by, among other things, signing attendance sheets annexed to minutes of board meetings in which substantial transactions were purportedly agreed when he did not attend any such meetings. These meetings approved a number of transactions that turned out to be problematic for TF. In commenting on the order, the SFC’s Executive Director of Enforcement said: “Directors cannot abdicate their duties to safeguard the company’s interests and keep members properly informed. It is even worse if directors connive in records of meetings that have not taken place and in decisions that are detrimental to the company. The consequences will be serious as today’s decision by the court demonstrates.”
  • The MMT has banned Tiger Asia and Mr. Bill Hwang from trading in securities in Hong Kong following their admission to having engaged in insider dealing. Tiger Asia had been given advance notice and was invited to participate in two placements of existing shares of Bank of China shares by UBS AG and RBS on 31 December 2008 and 13 January 2009 respectively and was provided with details of both placements after being told the information was confidential and price-sensitive. Tiger Asia had agreed not to deal in BOC shares after receiving the information, but short sold (a) 104 million BOC shares before the placement by UBS AG on 31 December 2008 making a notional profit of around HK$9 million, and (b) 256 million BOC shares before the placement by RBS on 13 January 2009 making a notional loss of around HK$10 million. Tiger Asia took similar actions in relation to a placing of China Construction Bank shares by Bank of America in January 2009. Tiger Asia also agreed to pay a total of HK$45,266,610 to around 1,800 investors in Hong Kong and overseas who traded with Tiger Asia in the insider dealing transactions, representing the difference between the actual price of BOC and CCB shares sold by Tiger Asia and the value of those shares taking into account the inside information known to Tiger Asia (as assessed by expert evidence). Tiger Asia also admitted to having engaged in “market manipulation.”
  • The SFC suspended Mr. Eric Shum Kam Chi (Mr. Shum) from acting as a representative in all regulated activities and as a responsible officer for failures in his capacity as responsible officer and sponsor principal of Sun Hung Kai International Limited (SHK). The suspension arose from Mr. Shum and SHK’s work on the listing of Sino-Life Group Limited (Sino-Life), in respect of which SHK had failed to (i) assess the accuracy and the completeness of the information submitted by Sino-Life to demonstrate that it satisfied the financial requirements to list, (ii) ascertain the existence of various encumbrances on the title of a major business deal of Sino-Life in Taiwan, (iii) properly assess the business of the Sino-Life’s wholly-owned subsidiary in Taiwan, (iv) ensure true, accurate and complete disclosure was made to the HKEx and in Sino-Life’s prospectus and breached the sponsor undertaking to the SEHK by filing untrue statements in the sponsor declaration, and (v) keep proper books and records in relation to the sponsor work conducted.
 

Skadden

For further information, please contact:

 

Christopher Betts, Partner, Skadden
christopher.betts@skadden.com


Edward Lam, Partner, Skadden
edward.lam@skadden.com


Alec Tracy, Partner, Skadden
alec.tracy@skadden.com


Will Cai, Partner, Skadden
will.cai@skadden.com

 



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