按月份存档： 8 月, 2015

1. Takeovers Panel sanctions Chow Yei Ching, Oscar Chow Vee Tsung and Joseph Leung Wing Kong for breach of Takeovers Code
2. SFAT affirms SFC decision to reprimand and fine The Pride Fund Management Limited for failing to enter into mediation managed by the Financial Dispute Resolution Centre
3. SFC suspends Tai Nga Chun for operating secret account
4. SFC bans Laura Kiang Mang Yi for three years for misconduct
5. SFC proposes changes to financial resources rules
6. Fund management business reached record high in 2014
7. EY’s appeal over audit working papers discontinued
8. SFC commences MMT proceedings against AcrossAsia Limited, its Chairman and CEO for late disclosure of inside information

1. Takeovers Panel sanctions Chow Yei Ching, Oscar Chow Vee Tsung and Joseph Leung Wing Kong for breach of Takeovers Code

On 2 July 2015, The Takeovers and Mergers Panel (“Takeovers Panel”) imposed Cold Shoulder Orders against Mr Chow Yei Ching (“Mr Chow Y.C.”), Mr Oscar Chow Vee Tsung (“Mr Oscar Chow”) and Mr Joseph Leung Wing Kong (“Mr Leung”) and publicly censured them for breach of the Code on Takeovers and Mergers and Share Repurchases (“Takeovers Code”).

Background

On 20 November 2013, the Securities and Futures Commission (“SFC”) Takeovers Executive commenced disciplinary proceedings before the Takeovers Panel against Mr Chow Y.C., Mr Oscar Chow and Mr Leung over a serious breach of the Takeovers Code. The SFC’s allegations were that the three actively co-operated to assist the late Ms Nina Kung (“Ms Kung”) to obtain or consolidate control of ENM Holdings Limited (“ENM”) and avoid the triggering of a mandatory general offer under the Takeovers Code. At the relevant time, Ms Kung was the largest shareholder of ENM. She was also the chairwoman and the sole beneficial owner of the Chinachem Group.

Between 2000 and 2002, Mr Chow Y.C. acquired a total of 160 million shares of ENM (approximately 9.69% of ENM’s issued share capital) on Ms Kung’s behalf and at her request. Mr Chow Y.C. paid for the purchase of the ENM shares and was subsequently reimbursed by Ms Kung. The reimbursement was handled by Mr Oscar Chow and Mr Leung. Mr Chow Y.C. held the ENM shares under four British Virgin Island (“BVI”) companies he owned through the issuance of bearer shares until December 2009. To comply with the changes to BVI law requiring greater transparency in the ownership of bearer shares, Mr Chow Y.C. arranged for the ownership of the 160 million ENM shares to be split equally between one of his daughters and Mr Oscar Chow in December 2009.

The Takeovers Code treats persons acting in concert as being the equivalent of a single person and aggregates their shareholdings. Therefore, Mr Chow Y.C.’s acquisitions increased the collective shareholding of the concert group in ENM from 34.64% to 44.33%, thus triggering a mandatory general offer obligation under the Takeovers Code. However, none of the share acquisitions in ENM by Mr Chow Y.C. on Ms Kung’s behalf were publicly disclosed and remained undisclosed for a protracted period. This “warehousing” arrangement enabled Ms Kung to secretly hold the ENM shares and avoid an obligation under the Takeovers Code to make a general offer. As a result, ENM shareholders were deprived of their fundamental right to receive a general offer to buy their shares. Mr Chow Y.C. brought the matter to the SFC’s attention after receiving a letter in late April 2012 from the joint administrators of Ms Kung’s estate making enquiries about shares of ENM that belonged to the estate.

The Cold Shoulder Order

The Cold Shoulder Order against Mr Chow Y.C. denies him direct or indirect access to the securities markets for 10 years from 2 July 2015 to 1 July 2025. Mr Oscar Chow and Mr Leung are denied direct or indirect access to the securities markets for two years from 2 July 2015 to 1 July 2017. The Takeovers Panel published its written decision on 16 April 2015 setting out the reasons for finding them in breach of the abovementioned mandatory offer requirement under the Takeovers Code when they acted in concert with Ms Kung to obtain and consolidate control over ENM Holdings Ltd through the acquisition of voting rights and failed to make the required general offer.

Comment

Rule 26 is the overriding rule in the Takeovers Code and provides the circumstances in which a mandatory general offer must be made. This reflects General Principle 1 of the Takeovers Code and underpins the requirement for equal treatment of shareholders. Failure to make an offer that is required to be made under Rule 26.1 constitutes a serious breach of the Takeovers Code.

Pursuant to Rule 26.1, which came into force in December 2000, a mandatory general offer is required to be made for all the shares in the company if a person or group of persons acting in concert acquired shares resulting in either:

1. the person or concert group collectively holding 35% or more of the voting rights (known as the “trigger”). The trigger threshold was reduced to 30% on 19 October 2001; or
2. the person or concert group collectively holding between 35% and 50% of the shares and then going on to acquire, either individually or as a group, more than 5% in any 12 month period (known as the “creeper”). The creeper threshold was reduced to 2% on 19 October 2001.

In particular, the Takeovers Code defines persons acting in concert as comprising persons who, pursuant to an agreement or understanding, actively co-operate to obtain or consolidate control of a company through the acquisition by them of voting rights of the company.

For details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR70

2. SFAT affirms SFC decision to reprimand and fine The Pride Fund Management Limited for failing to enter into mediation managed by the Financial Dispute Resolution Centre

On 2 July 2015, the SFC reprimanded and fined The Pride Fund Management Limited (“Pride Fund Management”) HK$400,000 over its failure to enter into mediation with an eligible claimant under the Financial Dispute Resolution Scheme (“FDRS”) administered by the Financial Dispute Resolution Centre (“FDRC”). 

Background

The above disciplinary action follows a review of the SFC’s decision to sanction Pride Fund Management by the Securities and Futures Appeals Tribunal (“SFAT”). This is the first time the SFC has enforced obligations of intermediaries to comply with the FDRS under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”).

The FDRS, which is administered by the FDRC, is an important part of Hong Kong’s regulatory framework under which banks and brokers are obliged to enter into mediation and potentially arbitration proceedings to resolve certain financial disputes with clients or persons who have been provided with financial services. The SFC states that Pride Fund Management refused to mediate a dispute with an eligible claimant despite requests by FDRC staff, even after FDRC issued a Notice of Non-Compliance to Pride Fund Management in June 2013. It was only after the SFC commenced disciplinary proceedings against Pride Fund Management that it eventually agreed to enter into mediation with the claimant.

Pride Fund Management claimed it had not understood that it was required to comply with the FDRS. However, the Hon Mr Justice Hartmann NPJ, Chairman of the SFAT, who upheld the SFC’s decision but varied the fine from HK$700,000 to HK$400,000, found that Pride Fund Management’s non-compliance was deliberate and that although the obligations under the FDRS may not be generally understood, after consideration of the SFAT’s reasons in this case and public reprimand, there can be no further excuse “on the part of members of the financial industry for a lack of understanding, at least, of the scheme’s basic architecture”. The Hon Mr Justice Hartmann also warned that “sterner penalties can be expected in the future”.

Comment

The FDRC was set up in November 2011 to administer the FDRS, an independent financial dispute resolution scheme which requires financial institutions who are its members to resolve monetary disputes with their customers through mediation and, failing which, arbitration. Other than firms which carry on Type 10 (providing credit rating services) regulated activity under the SFO, financial institutions or financial service providers authorized by the Hong Kong Monetary Authority or licensed by the SFC are to be members of the FDRS.  In particular, the FDRC facilitates the resolution of monetary disputes between individual customers and financial institutions in Hong Kong.

The SFC takes non-compliance with the FDRS seriously and has stated that it will continue to take action against SFC-licensed intermediaries who fail to comply with the scheme. Specifically, paragraph 12A of the Code of Conduct requires a licensed person to comply with the FDRS for managing and resolving disputes administered by the FDRC in full and be bound by the dispute resolution processes provided for under the FDRS. Paragraph 12.6 of the Code of Conduct further requires a licensed person to render all reasonable assistance to the FDRS.

For further information, please refer to the Reasons of Determination issued by the SFAT:

http://www.sfat.gov.hk/english/determination/AN-2-2015-Determination.pdf

For details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR71

3.  SFC suspends Tai Nga Chun for operating secret account

On 13 July 2015, the SFC suspended Ms Tai Nga Chun (“Ms Tai”) for eight months from 10 July 2015 to 9 March 2016.

Background

The disciplinary action follows an SFC investigation which found that from January to June 2013, Ms Tai operated a secret account and conducted 85 personal trading activities through the account, in breach of her employer’s internal control policies with regard to employee dealings. At the time, Ms Tai was employed by Kingston Corporate Finance Limited.

The SFC considers Ms Tai’s conduct was dishonest and made it impossible for her employer to identify and monitor her trading activities, without which licensed corporations would not be able to detect potential malpractices arising from staff trading.

The SFC looked into the trading in Ms Tai’s account and found no sign of any other misconduct. The SFC has therefore reduced the period of suspension taking into account that Tai has expressed remorse for her misconduct.

Licensed persons are required to follow the employee dealing procedures implemented by their employers in accordance with the Code of Conduct, because such controls are not purely internal to their employers but constitute an integral part of the regulatory system, as they seek to ensure integrity in the manner in which employees conduct personal trading.

Comment

Pursuant to Paragraph 12.2 of the Code of Conduct, a licensed or registered person must have a written policy issued to employees specifying whether or not they can deal or trade for their own accounts in securities or futures contracts. If employees are permitted to deal or trade, the policy should specify the following matters:

1. the conditions on which employees may do so;
2. that employees should identify all related accounts and report them to senior management (“related accounts” refers to accounts of minor children and all accounts in which employees have a beneficial interest.);
3. that employees should generally be required to deal through the licensed or registered person or its affiliates;
4. that if employees are allowed to deal in securities and/or futures contracts on a recognized stock or futures market respectively or in their derivatives, through other licensed or registered persons, the licensed or registered person (principal) and the employees should arrange for duplicate trade confirmations and statements of account to be provided to the senior management of the licensed or registered person (principal);
5. that any transactions covered by this section should be separately recorded and identified in the licensed or registered person’s records;
6. that transactions on employees’ and related accounts should be reported to and actively monitored by senior management, who should ensure that there are no irregularities and that the transactions are not prejudicial to the interests of clients; and
7. that a licensed or registered person should not knowingly have another licensed or registered person’s employee as a client without the written consent of that employee’s principal.

If the employee breaches his/her employer’s policies issued under Paragraph 12.2 of the Code of Conduct, this may reflect negatively on his/her fitness and properness to remain licensed. This could lead to suspensions or revocations of licenses.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR74

4.  SFC bans Laura Kiang Mang Yi for three years for misconduct

On 13 July 2015, the SFC banned Ms Laura Kiang Mang Yi (“Ms Kiang”) from re-entering the industry for three years from 13 July 2015 to 12 July 2018.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR75

5.  SFC proposes changes to financial resources rules

In summary, the consultation paper’s proposals cover seven key areas:

1. minimum capital requirements for licensed corporations engaging in over-the-counter derivatives activity;
2. capital treatments for market risks of over-the-counter derivatives and other proprietary trading positions;
3. capital treatments for counterparty credit risks arising from over-the-counter derivatives transactions;
4. introduction of an internal models approach to calculate the capital requirements for market risk for proprietary investments and counterparty credit risk arising from over-the-counter derivatives transactions;
5. measures to address operational risks of licensed corporations engaging in certain types of regulated over-the-counter derivatives activities or opting into certain capital approaches;
6. notification and reporting requirements related to over-the-counter derivatives activity; and
7. miscellaneous technical changes to other areas of the FRR.

Following the consultation, the SFC plans to further consult the public on subsidiary legislation which sets out the proposed changes. The public is invited to submit their comments to the SFC by 16 October 2015. Written comments may be sent online via the SFC website (www.sfc.hk), by email to [email protected], by post or by fax to 2523 4598.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR76

6. Fund management business reached record high in 2014

All market players recorded strong performance during 2014.

1. The aggregate business of licensed asset management and fund advisory corporations amounted to HK$12,920 billion at the end of the year, up 9.6% and once again representing the largest proportion of the combined asset management business.
2. Registered institutions recorded an 11.6% increase in their aggregate asset management and other private banking businesses, which reached HK$4,104 billion.
3. Insurance companies reported a 24.2% increase in their assets under management to HK$452 billion.

Some other findings of the survey are set out below:

1. Non-REIT (real estate investment trust) asset management business increased by 11.9% to HK$12,770 billion, of which HK$6,856 billion (or 53.7%) was managed in Hong Kong.
2. 72.5% of the assets managed in Hong Kong were invested in Asia.
3. Other private banking business increased by 12.5% to HK$3,095 billion.
4. Fund advisory business decreased by 3% to HK$1,611 billion.
5. The market capitalisation of SFC-authorized REITs increased by approximately 16.4% to HK$206 billion.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR77

7. EY’s appeal over audit working papers discontinued

On 23 July 2015, EY has discontinued its appeal against court orders compelling production to the SFC of specified accounting records in its possession.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR79

 

8. SFC commences MMT proceedings against AcrossAsia Limited, its Chairman and CEO for late disclosure of inside information

The SFC has commenced proceedings in the Market Misconduct Tribunal (“MMT”) against AcrossAsia Limited (“AcrossAsia”) for failing to disclose highly sensitive inside information as soon as reasonably practicable.

Background

The SFC has also commenced proceedings in the MMT against Mr Albert Saychuan Cheok (“Mr Cheok”), the Chairman of AcrossAsia, and Mr Vicente Binalhay Ang (“Mr Ang”), the Chief Executive Officer of AcrossAsia, for their reckless or negligent conduct causing the alleged breach by the company of the provisions of the statutory corporate disclosure regime.

This is the first set of proceedings in the MMT brought by the SFC in relation to the disclosure obligations imposed on listed companies under the Securities and Futures Ordinance since they became effective on 1 January 2013.

The SFC’s allegations arise from the litigation in Indonesia between AcrossAsia and its subsidiary, PT First Media Tbk (“PT First Media”). At dispute was the failure of AcrossAsia to repay the money owed to PT First Media. The litigation led to enforcement proceedings by PT First Media against AcrossAsia, including insolvency-related proceedings in Indonesia against AcrossAsia by way of a petition dated 20 December 2012 and a summons dated 28 December 2012. These proceedings sought, among other things, to suspend AcrossAsia’s obligation for payment of debts temporarily to enable a composition plan to be presented to PT First Media and to appoint an Indonesian judge and administrators to manage AcrossAsia’s assets.

Copies of the court documents, which were in Bahasa Indonesian, were received by AcrossAsia’s Hong Kong office on 2 January 2013, and their English translations were circulated to Mr Cheok and Mr Ang on 4 January 2013. However, AcrossAsia did not disclose such information to the public until 17 January 2013 after the Indonesian court made these insolvency-related orders against AcrossAsia on 15 January 2013. AcrossAsia sought a suspension of trading on 15 January 2013 and when trading resumed on 22 February 2013, the share price fell by 22.5%.

The SFC alleges that the issue of the insolvency-related proceedings in Indonesia together with their contents were specific information regarding AcrossAsia, highly price sensitive and not generally known to the public at the material time because these proceedings threatened AcrossAsia with loss of control of its major asset, including its stake in PT First Media in Indonesia, and could lead to AcrossAsia being put into liquidation.

For further details, please refer to:

http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/enforcement-news/doc?refNo=15PR78

The article is for general information purpose only and is not intended to constitute legal or other professional advice.

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