Jurisdiction - Hong Kong
Enforcement News.

15 February, 2012

Public censure for failing to ensure accuracy and completeness of the prospectus (1)
In December 2011, Playmates Toys Limited (the “Company”), an executive director and a former executive director were publicly censured for failing to ensure the accuracy and completeness of the Company’s prospectus.
The prospectus failed to disclose the actual significant deterioration in the Company’s business in Q4 of 2007, and instead contained a confirmation by the directors that “there has been no change in our financial or trading position since 30 June 2007, being the date of our latest audited combined financial results”. 
The Company was held to have breached Listing Rules 2.13(2) and 11.07, and the director and former director were each held to breached his Director’s Undertakings for failing to use his best endeavours to procure the Company’s compliance with the Listing Rules. 
Criticism of Fidelity Worldwide Investment for late disclosure of its dealings in the shares of Little Sheep Group Limited (2)
In November 2011, Fidelity Worldwide Investment was criticized for breaching Rule 22 of the Takeovers Code as a result of its late disclosure of dealings in the shares of Little Sheep Group Limited during an offer period. 
The disclosure obligations under Rule 22 are intentionally more onerous than those under Part XV of the Securities and Futures Ordinance (“SDI”) in that (i) Rule 22 requires filing to be made by 10:00 a.m. on the business day following the dealing; (ii) there are no de minimis thresholds; and (iii) Rule 22 requires the 
disclosure of prices paid or received for each underlying trade whilst SDI only requires the disclosure of the highest and the average price paid or received. 
Conflict of interests by a research analyst
In October 2011, a research analyst was banned by the SFC from re-entering the industry for two years for operating a secret securities trading account and failing to avoid conflicts of interest. The conflicts of interests by the research analyst included:
  • failure to disclose her financial interests in two listed corporations that were the subjects of 19 research reports prepared by her – Paragraph 16.4(d) of the Code of Conduct requires analysts to disclose their financial interests in a listed corporation reviewed by them in their research report.
  • dealing in the securities of listed corporations that were the subjects of research reports prepared by her within the dealing blackout period imposed on analysts by the SFC’s Code of Conduct – ‚ÄčParagraph 16.4(b)(ii) of the Code of Conduct prohibits analysts from dealing or trading in any securities of a listed corporation that an analyst has reviewed within 30 days prior to and 3 business days after the issuance of the investment research on the listed corporation.
The SFC considers such conduct seriously compromised the role and duty of the research analyst and called into question the independence and objectivity of those
research reports.
For further information, please contact:
Venantius Tan, Partner, Morrison Foerster
John Moore, Partner, Morrison Foerster


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