Compliance Pioneer - Vol. 9
GCC Consulting
GCC Consulting is a quality bespoke consulting and advisory firm, formerly known as Global Compliance Company.
We provide a comprehensive overview of the latest regulatory developments and enforcement actions in the Hong Kong financial market, offering insights for compliance professionals and industry stakeholders.
Regulatory
Greater connectivity driving Hong Kong’s capital markets forward: SFC Quarterly Report
Hong Kong’s capital markets continued to thrive in the third quarter, driven by strengthened connectivity with Mainland China and the Middle East, according to the SFC’s latest Quarterly Report. Notable highlights include record net inflows of RMB664.3 billion through the Mainland-Hong Kong Stock Connect and significant growth in the ETF market, boosted by the enhanced ETF Connect and new listings on the Saudi exchange. The Cross-boundary Wealth Management Connect and Swap Connect also saw increased investor participation. Additionally, Hong Kong’s asset management industry expanded, with ETFs growing 34% year-on-year and licensed asset managers rising 24%. The SFC also advanced virtual asset platform licensing and streamlined IPO procedures amid active market operations. Enforcement actions led to major convictions in market manipulation and securities-related fraud cases.
SFC welcomes launch of Integrated Fund Platform
The Securities and Futures Commission (SFC) welcomed the launch of the first phase of HKEX’s Integrated Fund Platform (IFP), starting with the Fund Repository, which offers investors centralized access to retail fund information. Future components, including a business platform and communications network, will streamline fund transactions between managers and distributors. SFC Executive Director Christina Choi emphasized that the platform will enhance transparency, support informed investment decisions, and boost retail participation in Hong Kong’s fund market. The SFC pledged continued collaboration with HKEX and industry stakeholders for the platform’s full implementation.
SFC steps up anti-scam publicity with “Don’t be Sucker” campaign
The Securities and Futures Commission (SFC) launched the “Don’t be Sucker” anti-scam campaign to raise public awareness of common investment scams, including online romance scams, impersonation, and deceptive tips from financial influencers. Central to the campaign is “Shui Yu” (水魚), a cartoon character symbolizing gullible investors easily tricked by fraudulent schemes. The campaign features engaging materials like a rap song, music video, and social media content to appeal to all age groups, especially younger audiences. The SFC will also participate in the Anti-Scam Carnival on 14-15 December 2024, offering educational games to promote fraud prevention and investor vigilance.
Shaping a Sustainable Future: Hong Kong’s New ESG Reporting Roadmap Explained
The Hong Kong Government has launched a roadmap on sustainability disclosure, outlining the adoption of the International Financial Reporting Standards - Sustainability Disclosure Standards (ISSB Standards) for publicly accountable entities (PAEs). Large PAEs are expected to fully adopt the ISSB Standards by 2028, reinforcing Hong Kong’s role as a leading international financial and green finance hub. Secretary for Financial Services & the Treasury Christopher Hui emphasized the city’s commitment to advancing green and sustainable financing through global best practices. The Financial Services & the Treasury Bureau will work with regulators and stakeholders to ensure smooth implementation through capacity building and technological solutions. The Hong Kong Institute of Certified Public Accountants plans to issue fully aligned Hong Kong Standards by the end of this year, effective from August 2024. From January 2024, Main Board issuers must disclose climate-related information on a “comply or explain” basis, with Hang Seng Composite LargeCap Index constituents facing mandatory disclosure from 2026. A market consultation in 2027 will precede mandatory sustainability reporting for listed PAEs by 2028, while significant non-listed PAEs will also be required to comply. The roadmap further outlines the development of a robust sustainability disclosure ecosystem, including assurance services, data technology, and capacity building.
Circular to Licensed Corporations, SFC-licensed Virtual Asset Service Providers and Associated Entities - Anti-Money Laundering / Counter-Financing of Terrorism
Early Alert on United Nations Sanctions
The United Nations Security Council (UNSC) sanctions committee has updated its sanctions list for ISIL (Da’esh) and Al-Qaida, amending details of three individuals on December 2, 2024. Licensed corporations, SFC-licensed virtual asset service providers, and associated entities must update their screening databases accordingly for sanctions compliance. They are reminded to adhere to the regulatory standards outlined in the UNSC sanctions circular issued on February 7, 2018.
Circular to Licensed Corporations, SFC-licensed Virtual Asset Service Providers and Associated Entities - Anti-Money Laundering / Counter-Financing of Terrorism
Webinar Materials
Presentation materials from the recent Anti-Money Laundering and Counter-Financing of Terrorism Webinar, hosted by the Securities and Futures Commission (SFC) and the Hong Kong Police Force, are now available on the SFC website. Licensed corporations, SFC-licensed virtual asset service providers, and associated entities are encouraged to download these materials for reference and internal training purposes.
Circular to intermediaries
SFC and HKMA joint product survey 2024
The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) will conduct the 2024 joint survey on the sale of non-exchange-traded investment products by licensed corporations (LCs) and registered institutions (RIs) engaged in dealing or advising on securities. The survey aims to assess industry practices, monitor market trends, and enhance regulatory oversight. It covers sales to non-institutional professional investors from 1 January to 31 December 2024. The questionnaire includes three sections: general information, sales activity details, and supplementary data for firms with higher transaction volumes. Submission deadlines range from 17 January to 7 March 2025, depending on the sections completed. All collected data will remain confidential and be used only in anonymized, aggregated form.
Circular in relation to the clearing and record keeping rules for the OTC derivatives regime – changes to the list of persons designated as financial services providers
The revised list of financial services providers (FSPs) under the Securities and Futures (OTC Derivative Transactions—Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules has been gazetted and will take effect on 1 January 2025. Licensed persons must ensure that OTC derivative transactions exceeding the Clearing Threshold during a Calculation Period are centrally cleared from the corresponding Prescribed Day, including transactions with FSPs. For further details, refer to the Clearing Rules and related FAQs on the Mandatory Clearing Regime.
Special Mortgage Scheme for Uncompleted Residential Properties
The Hong Kong Monetary Authority (HKMA) has introduced a one-off special scheme to relax supervisory requirements for property mortgage loans, allowing banks to assist homebuyers of uncompleted residential properties purchased between 2021 and 2023 using stage payment plans. Amid a 25% drop in property prices since their peak, some buyers face challenges securing funds due to lower property valuations. Under the scheme, eligible homebuyers can access loans with a maximum loan-to-value (LTV) ratio of 80% and a debt servicing ratio (DSR) limit of 60%. The scheme applies to self-occupied properties with mortgage applications submitted on or after December 4, 2024. Buyers are advised to consult participating banks for details and carefully assess financial risks when choosing payment plans.
The Seventh Hong Kong-Switzerland Financial Dialogue
The seventh Hong Kong-Switzerland Financial Dialogue, co-organized by the Hong Kong Monetary Authority (HKMA) and Switzerland’s State Secretariat for International Finance (SIF), took place in Hong Kong on December 4. Chaired by HKMA Deputy Chief Executive Darryl Chan and Ambassador Christoph König, the Dialogue aimed to strengthen collaboration in financial services and exchange views on global financial issues. Discussions covered regional and domestic policy challenges, and explored opportunities in sustainable finance, Fintech, and market connectivity, with participation from various Swiss and Hong Kong representatives.
Public consultation on proposed enhancements to Banking Ordinance
The Hong Kong Monetary Authority (HKMA) launched a public consultation on 5 December to propose enhancements to the Banking Ordinance (Cap. 155) to address evolving banking practices and regulatory needs. Following a review, the HKMA aims to align Hong Kong’s regulatory framework with global standards, improve supervisory capabilities, and address specific challenges. Key proposals include establishing a regulatory framework for designated holding companies, enhancing the Monetary Authority’s access to skilled resources, and making technical amendments. The consultation, which also proposes changes to related ordinances, runs until 28 January 2025. Details are available on the HKMA website.
HKMA and SAMA deepen financial cooperation between Hong Kong and Saudi Arabia
The Hong Kong Monetary Authority (HKMA) and the Saudi Central Bank (SAMA) held a bilateral meeting in Hong Kong on 5 December to strengthen cooperation between their financial sectors. Discussions covered financial infrastructure, supervisory technology, global investment opportunities, and economic research. The meeting follows a similar engagement in Riyadh in July 2023. HKMA Chief Executive Eddie Yue highlighted the growing connectivity between Hong Kong and Saudi Arabia, while SAMA Governor Ayman Al-Sayari emphasized the shared commitment to fostering international collaboration and innovation for a resilient financial system.
Hong Kong’s Latest Foreign Currency Reserve Assets Figures Released
The Hong Kong Monetary Authority (HKMA) reported that Hong Kong’s official foreign currency reserve assets totaled US$425.1 billion at the end of November 2024, up from US$421.3 billion in October. There were no unsettled foreign exchange contracts at either month-end. The reserves amount to over five times the currency in circulation and approximately 39% of the Hong Kong dollar M3 money supply.
Record of Discussion of the Meeting of the Exchange Fund Advisory Committee Currency Board Sub-Committee held on 30 October 2024
During the review period (26 June – 18 October 2024), the Hong Kong dollar (HKD) traded within a stable range against the US dollar, supported by reduced carry trades, stronger equity demand, and improved local market sentiment due to Mainland China’s economic stimulus measures. HKD interbank rates mirrored US rates while responding to local liquidity dynamics. The HKMA extended Real Time Gross Settlement (RTGS) system hours temporarily to accommodate increased payment flows. The Monetary Base rose to HK$1,938.33 billion, fully backed by foreign reserves, while the Best Lending Rates dropped after a US federal funds rate cut. Global markets saw brief volatility due to US recession fears and geopolitical tensions, while China’s economy slowed despite stimulus efforts. Hong Kong’s economy grew moderately, driven by strong goods exports and recovering tourism, though local consumption and commercial property markets remained under pressure. The Sub-Committee also reviewed changes in major economies’ monetary policy frameworks.
Expansion of One-Stop Dataset of Physical Banking Facilities of Retail Banks in Hong Kong
The Hong Kong Monetary Authority (HKMA) announced the release of a new spatial dataset via Open API, offering details on five types of self-service banking machines from 20 retail banks in Hong Kong. This addition expands HKMA’s banking facility database to three comprehensive datasets, including physical branches and ATMs, which have been enhanced with features like barrier-free access and supported currencies. The datasets are available for download, encouraging developers and the public to create practical applications using the open data.
The People's Bank of China will issue Renminbi Bills through Central Moneymarkets Unit of Hong Kong Monetary Authority
The People’s Bank of China (PBOC) will hold a tender for RMB20 billion six-month RMB Bills on 18 December 2024, with settlement on 20 December 2024. Qualified Central Moneymarkets Unit (CMU) members can participate through the CMU BID on a coupon-bid basis, with a minimum bid of RMB500,000 and interest rates specified to two decimal places. The Bills, issued at par value, will mature on 20 June 2025, with interest payable on the same date based on the highest accepted tender rate. Tender details are available in the Tender Information Memorandum from the Hong Kong Monetary Authority (HKMA) and Bank of China (Hong Kong) Limited, which also serves as the Issuing and Lodging Agent. Results will be published on the HKMA and CMU websites.
Enhancing Customer Empowerment in Anti-Fraud-and-Scam Protection through “Money Safe” Protection and Option of Disabling Internet Banking Platforms
In response to rising fraud and scam cases, the Hong Kong Monetary Authority (HKMA) is introducing “Money Safe” (MS), an extra layer of security allowing customers to protect portions of their bank deposits from fund outflows unless verified by the customer. Retail banks must implement MS for individual customers by December 31, 2025, and are encouraged to launch it earlier or in phases. Banks are also required to offer customers the option to disable Internet banking setup for accounts, reducing risks of fraudulent misuse, with a deadline of June 30, 2025, for implementation. Additional measures, such as deactivating online payee registration and fund transfer limit increases, are under exploration.
Analytical Accounts of the Exchange Fund
The Hong Kong Monetary Authority (HKMA) reported that the Exchange Fund’s foreign assets rose by HK$30.8 billion to HK$3,506.4 billion at the end of November 2024. The Monetary Base stood at HK$1,950.1 billion, comprising currency in circulation, banking system balances, and Exchange Fund Bills and Notes. Claims on the private sector totaled HK$287.8 billion, while foreign liabilities amounted to HK$28.0 billion. These figures were released under the International Monetary Fund’s Special Data Dissemination Standard (SDDS).
Revised Supervisory Policy Manual (SPM) Module CA-D-1“Guideline on the Application of the Banking (Disclosure) Rules”
The Monetary Authority has issued a revised version of the SPM module CA-D-1, “Guideline on the Application of the Banking (Disclosure) Rules,” as a guidance note. The update incorporates changes to align with the Banking (Disclosure) (Amendments) Rules 2023, effective 1 January 2025. The revised module is accessible on the HKMA’s public and Supervisory Communication websites.
Basel III Final Reform Package – New and Amended Codes of Practice
The Hong Kong Monetary Authority announced that as part of the Basel III final reform implementation, three updated regulatory codes were published in the Gazette and will take effect on 1 January 2025. These include the new Banking (Capital) (Operational Risk) Code, the amended Banking (Exposure Limits) Code, and the amended Banking (Liquidity Coverage Ratio – Calculation of Total Net Cash Outflows) Code.
HKEX to Introduce New Post-Trade Services on Orion Cash Platform
Hong Kong Exchanges and Clearing Limited (HKEX) announced a multi-year enhancement programme for its cash equities market’s post-trade services through the Orion Cash Platform (OCP), starting in mid-2025. Key upgrades include real-time trade data processing, automated post-trade reporting, and settlement instruction matching, with technical readiness for a T+1 settlement cycle by year-end 2025. HKEX CEO Bonnie Y Chan emphasized the initiative’s role in strengthening Hong Kong’s position as an international financial center through modernized, efficient infrastructure. HKEX will engage market participants and stakeholders throughout the platform’s rollout, complementing its existing Central Clearing and Settlement System (CCASS).
Exchange Presents Results of Review of Issuers’ 2023 Annual Reports and Publishes New Guide on Preparation of Annual Report
The Stock Exchange of Hong Kong Limited (HKEX) published its annual review of listed issuers’ 2023 financial year-end reports, highlighting high compliance rates with disclosure requirements and continuous improvements in reporting of money lending transactions. The review, supported by AI technology, assessed areas such as financial statements, lending transactions, and management discussions. To further enhance transparency, HKEX issued a customised Guide on Preparation of Annual Report, offering a comprehensive reference for issuers. Katherine Ng, HKEX Head of Listing, emphasized the importance of governance and encouraged issuers to use the Guide for improved reporting practices. The Report and Guide are available on the HKEX website.
Asian Insurance Forum 2024 concludes with record-high participation and insightful dialogues unlocking new opportunities amidst volatility
The Insurance Authority (IA) hosted the seventh Asian Insurance Forum (AIF) on 10 December 2024, themed “Rising to the Challenge amidst Global Volatility,” featuring over 20 global financial leaders and attracting over 2,400 participants. Key discussions centered on global supervisory priorities, insurance in wealth management, and bolstering Hong Kong’s position as a financial hub. Highlights included keynote speeches from Mr. Stephen Yiu, IA Chairman, and Mr. John Lee, Chief Executive of HKSAR, emphasizing Hong Kong’s growing role in the insurance sector. Notably, Hong Kong was announced as the host for the 2026 IAIS Annual Conference. The event concluded with an interactive session with IA leadership discussing future industry development.
AFRC Hosts Landmark Regional Regulatory Forum 2024 to Restore Public Trust in the Accounting and Audit Profession
The Accounting and Financial Reporting Council (AFRC) hosted the inaugural Regional Regulatory Forum (RRF), uniting over 350 participants from global regulators, accounting firms, professional bodies, and investors to discuss the future of the accounting profession. Keynote speakers, including Hong Kong’s Financial Secretary Paul Chan and AFRC Chairman Dr. Kelvin Wong, emphasized the importance of robust regulation and collaboration in fostering sustainable development, high-quality financial reporting, and investor confidence. Themed “Transforming Regulation, Governance, and Development for a Resilient and Sustainable Future,” the forum addressed critical topics such as sustainability reporting, technological disruption, and talent management, reinforcing Hong Kong’s role as a hub for thought leadership in the accounting profession.
HKICPA renews MoU with BICPA to strengthen exchanges between the accounting professions in Beijing and Hong Kong
The Hong Kong Institute of Certified Public Accountants (HKICPA) and the Beijing Institute of Certified Public Accountants (BICPA) signed a new three-year Memorandum of Understanding (MoU) to deepen cooperation in member services, professional knowledge exchange, and talent development. The partnership aims to support accounting professionals and firms in both regions through mutual business development, CPD programs, and talent cultivation initiatives. Key areas include encouraging CPD participation, facilitating cross-border collaborations, and offering internships and exchanges for accounting students. The MoU was signed during BICPA’s visit to Hong Kong, marking a strengthened partnership to enhance the accounting profession’s competitiveness in both regions.
HKICPA welcomes the Government’s Roadmap on Sustainability Disclosure in Hong Kong
The Hong Kong Institute of Certified Public Accountants (HKICPA) welcomes the Government’s Roadmap on Sustainability Disclosure, outlining Hong Kong’s adoption of the IFRS Sustainability Disclosure Standards (ISSB Standards). As the designated sustainability reporting standard setter, HKICPA will publish the HKFRS Sustainability Disclosure Standards (HKFRS SDS), fully aligned with ISSB Standards, by year-end. HKICPA President Edward Au emphasized the Roadmap’s role in strengthening Hong Kong’s sustainability reporting framework and its position as a green finance hub. Following extensive consultations, HKICPA will prioritize the HKFRS SDS’s phased application for large publicly accountable entities and continue collaborating with stakeholders to build a comprehensive sustainability disclosure ecosystem.
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HKICPA signs the Strategic Agreement for Developing Guangdong-HK-Macau Accounting Industry: Deepening cooperation accounting industries within the region
The Hong Kong Institute of Certified Public Accountants (HKICPA), along with the Guangdong Institute of Certified Public Accountants (GDICPA), the Hong Kong Association of Registered Public Interest Entity Auditors (PIEAA), and the Union of Associations of Professional Accountants of Macau (UAPAM), signed the 2024 Strategic Agreement for Developing the Guangdong-Hong Kong-Macau Accounting Industry. The Agreement, effective for three years, aims to strengthen collaboration in five key areas: information sharing, business cooperation, talent development, promotional efforts, and innovation exchange. Government officials from the three regions attended the signing ceremony in Guangzhou, highlighting the Agreement’s role in fostering the accounting profession’s growth within the Greater Bay Area (GBA). The event also launched the second cohort of the “High-end CPA Training Programme” to cultivate accounting talent equipped for evolving industry demands.
HKICPA publishes HKFRS Sustainability Disclosure Standards
The Hong Kong Institute of Certified Public Accountants (HKICPA) has issued the HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures, fully aligned with the IFRS Sustainability Disclosure Standards (ISSB Standards), effective 1 August 2025. HKICPA President Edward Au highlighted the standards’ role in enhancing corporate sustainability reporting, boosting Hong Kong’s competitiveness as a financial hub. To support implementation, HKICPA will provide capacity-building initiatives, including a free public briefing on 16 January 2025, technical FAQs, and an implementation support platform. The standards will be applied to large publicly accountable entities, with full adoption expected by 2028.
Enforcement
Monetary Authority takes disciplinary action against China CITIC Bank International Limited for contraventions of Anti-Money Laundering and Counter-Terrorist Financing Ordinance
The Hong Kong Monetary Authority (HKMA) fined China CITIC Bank International Limited (CITIC) HK$4,000,000 for breaches of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) from November 2015 to July 2018. The investigation found deficiencies in CITIC’s automated transaction monitoring system due to incorrect implementation of detection rules, reducing alerts for suspicious transactions. Additionally, CITIC failed to examine and document the background of certain unusual transactions. The HKMA considered the severity of the breaches, CITIC’s remedial actions, cooperation during the investigation, and its previously clean record when imposing the penalty, underscoring the importance of effective financial crime monitoring systems.
Relevant Provisions:
Under Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), financial institutions are mandated to implement stringent measures to prevent and detect illicit financial activities. Specifically, paragraph (c) of section 5(1) of Schedule 2 requires institutions to scrutinize the background and purpose of complex, unusually large, or atypical transactions that lack an apparent economic or lawful purpose, documenting their findings in writing. Additionally, section 19(3) of Schedule 2 obligates these institutions to establish and maintain effective procedures to fulfill their duties under section 5, ensuring robust internal controls and compliance mechanisms are in place to combat money laundering and terrorist financing.
Key Take Away
For Individuals
Individuals should prioritize banking and financial transactions with institutions that demonstrate strong compliance and regulatory practices. Regulatory breaches can impact service quality, trust, and the institution’s overall stability, emphasizing the importance of choosing reputable and well-regulated financial service providers.
For Corporations
Corporations must implement robust anti-money laundering (AML) controls, ensuring automated monitoring systems are properly configured, regularly tested, and updated to detect suspicious transactions. Strong governance practices such as independent validation, maker-checker controls, and comprehensive record-keeping are essential to maintain regulatory compliance and avoid penalties.
Exchange’s Disciplinary Action against a Former Director of Cathay Group Holdings Inc. (Stock Code: 1981)
The Stock Exchange of Hong Kong Limited imposed a Director Unsuitability Statement and censure against Mr. Yan Xiang, former executive director of Cathay Group Holdings Inc. (formerly Cathay Media and Education Group Inc.), declaring him unsuitable to serve as a director or senior manager within the company or its subsidiaries. This decision followed Mr. Yan’s failure to cooperate with an investigation by the Exchange’s Listing Division, despite multiple reminders. His obligations under the Listing Rules included providing timely responses and up-to-date contact information, which he neglected. The Listing Committee emphasized that directors remain accountable even after leaving their roles or after a company ceases to be listed. The sanctions apply solely to Mr. Yan and not to the company or its other directors.
Relevant Rules and Regulations
Under Hong Kong Stock Exchange Listing Rules 3.09C and 3.20, directors are obligated to cooperate fully with regulatory investigations by responding promptly to inquiries and maintaining up-to-date contact information for three years after leaving their position. Failure to comply results in regulatory notices being considered served at their last known address. Importantly, a director’s duty to cooperate continues even after resignation or if the company is delisted. Non-compliance with these provisions can lead to serious consequences, including public censure and a Director Unsuitability Statement, rendering the individual ineligible for future directorships or senior management roles.
Key Take Away
For Individuals
Directors and senior management must fulfill regulatory obligations even after resigning or if the company is no longer listed. They are required to cooperate with investigations, respond promptly, and maintain updated contact information. Non-compliance can lead to public censure and being declared unsuitable for future directorships.
For Corporations
Companies should implement strong governance frameworks, ensuring directors understand their ongoing obligations. Maintaining clear records, enforcing compliance procedures, and conducting proper exit processes can help reduce legal and reputational risks while ensuring long-term operational stability.
Announcement – In relation to the matter of China Tianrui Group Cement Company Limited (incorporated in Cayman Islands with limited liability) (Stock Code: 1252) Resumption of trading
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The Stock Exchange of Hong Kong Limited announced that trading in the shares of China Tianrui Group Cement Company Limited will resume at 1:00 pm on 9 December 2024. This follows the Company’s delayed publication of its interim results for the six months ended 30 June 2024, which initially caused a trading suspension. Despite the Listing Committee’s earlier decision to cancel the Company’s listing if results were not released by 5 November 2024, the Company sought a review and published its results on 29 November 2024. After a hearing on 6 December 2024, the Listing Review Committee directed the resumption of trading, acknowledging that the Company had resolved the issues causing the suspension.
Key Take Away
For Individuals
Investors should closely monitor company announcements and regulatory actions, as delays in financial disclosures can lead to trading suspensions or even delistings. Staying informed helps manage investment risks and make timely decisions.
For Corporations
Corporations must prioritize timely financial reporting to maintain market confidence and avoid trading suspensions or potential delistings. Transparency, proactive communication with regulators, and adherence to compliance deadlines are crucial for sustaining investor trust and market presence.
Announcement - Cancellation of Listing by HKEX
The Stock Exchange of Hong Kong Limited has announced that the listing of the below companies will be cancelled:
These companies have suspended trading for more than six months, prompting the Listing Committee's decision to delist under Rule 6.01A(1). Shareholders are advised to seek professional advice regarding the implications of the delisting.
Key Take Away
For Individuals
Individuals should stay informed about company announcements and market conditions is critical to understanding potential risks. It’s also important to evaluate the implications of delisting on investment value and liquidity. Consulting financial experts can help assess the impact of such events on personal investment strategies.
For Corporations
Corporations should prioritize compliance with listing rules and resumption guidance to avoid the risk of delisting, as seen in the case of Goldstone Investment Group Limited. Maintaining proactive communication with shareholders is essential, especially during periods of suspension or financial distress. Additionally, companies should engage professional advisors early to effectively navigate regulatory requirements.
Court verdict on fraud over secret backdoor listing
The Securities and Futures Commission (SFC) welcomed the District Court’s conviction of Chim Pui Chung, his son Ricky Chim Kim Lun, and Wong Poe Lai in a conspiracy to defraud Asia Resources Holdings Limited (Asia Resources), its board, shareholders, and the Stock Exchange of Hong Kong (SEHK). The case involved a secret backdoor listing scheme where the Chims conspired with businessman Ma Zhonghong to sell control of Asia Resources through a fraudulent capital-raising exercise, involving $535.5 million in convertible notes and $210 million in illicit payments. Wong was convicted of laundering $42 million linked to the scheme. The Independent Commission Against Corruption (ICAC) led the investigation following a referral from the SFC, emphasizing their commitment to combating corporate fraud and protecting market integrity. Sentencing is scheduled for January 2024.
Key Take Away
For Individuals
The key takeaway for individuals from the Asia Resources backdoor listing case is the serious legal and personal consequences of engaging in fraudulent activities, including conspiracy to defraud, money laundering, and misusing corporate positions for personal gain. Individuals in positions of power must uphold transparency, disclose conflicts of interest, and act in the best interests of shareholders and stakeholders. The case highlights that regulatory authorities, such as the ICAC and SFC, actively investigate and prosecute financial crimes, emphasizing that no individual is above the law. Personal accountability, ethical conduct, and compliance with legal and corporate governance standards are essential to avoid criminal charges and severe penalties.
For Corporations
The key takeaway for corporations from the Asia Resources backdoor listing case is the critical importance of maintaining transparency, proper disclosure, and compliance with regulatory and listing requirements. Corporate boards and senior management must avoid conflicts of interest, disclose all material transactions, and ensure that capital-raising activities are conducted with integrity. Failure to do so can result in severe legal consequences, including criminal charges for fraud and money laundering, as well as reputational damage. The case underscores the necessity of strong corporate governance, internal controls, and cooperation with regulatory authorities to uphold market integrity and protect shareholder interests.
Exchange’s Disciplinary Action against Kaisun Holdings Limited (Stock Code: 8203) and Seven Directors
The Stock Exchange of Hong Kong censured Kaisun Holdings Limited and seven directors for breaching GEM Listing Rules by failing to disclose nearly HKD 40 million in loans and payments to Up Energy Development Group, despite its financial distress and liquidation. They also failed to announce securities transactions in 2019-2020. Executive directors Mr. Chan and Mr. Yang were directly involved, while other directors neglected compliance and internal controls, despite a 2017 warning. Sanctions include censure, criticism, mandatory training, a compliance adviser appointment, and an internal control review. The Exchange stressed directors’ duty to manage risks, ensure compliance, and take corrective action.
Relevant Rules and Regulations
Kaisun Holdings Limited and its directors breached key provisions of the GEM Listing Rules, including Rule 19.34 for failing to announce discloseable and major transactions, and Rule 19.40 for not obtaining shareholder approval. They also violated Rule 5.01 by neglecting fiduciary duties, including proper asset management and ensuring compliance. Additionally, Rule 5.20 was breached as compliance officers failed to advise the board on maintaining regulatory procedures. Lastly, the directors breached their undertakings under Appendix 6A by not using their best efforts to ensure the Company’s compliance with the GEM Rules.
Key Take Away
For Individuals
Individuals serving as directors or compliance officers must fulfill their fiduciary duties with due care, diligence, and integrity. They should ensure regulatory compliance, actively oversee company affairs, and seek professional advice when needed. Neglecting these responsibilities can result in personal sanctions, reputational harm, and restrictions on future directorships.
For Corporations
Corporations must maintain strong internal controls, ensure compliance with listing rules, and manage risks proactively. Directors should exercise due diligence, seek professional advice, and fulfill disclosure and shareholder approval obligations. Failure to comply can result in severe penalties, corrective actions, and reputational damage.