Market Existential Episode 21 | March 2023

Episode Description:

On 1 March 2023, Julia Charlton presented a webinar on the HKEX and SFC Disciplinary & Enforcement Actions between May and August 2022. This webinar provided a brief introduction and overview of the trends of the disciplinary and enforcement actions of the HKEX and the SFC from May to August 2022, and considered various enforcement cases of the HKEX and the SFC with an aim to give you an understanding and awareness on the enforcement areas and breaches which were focused by the Stock Exchange and the SFC during the said period.

In May 2022, the Stock Exchange took disciplinary actions against several companies and their directors, including Wuzhou International Holdings Limited, CIL Holdings Limited, CR Construction Group Holdings Limited and Zhejiang State-owned Capital Operation Company Limited. These cases underscored the significance of adhering to the disclosure requirements of the Listing Rules, and maintaining robust internal control systems.

In June 2022, we witnessed disciplinary actions against Mingfa Group (International) Company Limited and four former directors for failing to report various transactions to the board of directors and failing to comply the disclosure requirements under the Listing Rules. In addition, the SFC publicly reprimanded and fined China Everbright Securities (HK) Limited for failing to implement adequate and effective systems in anti-money laundering and counter-financing of terrorism, and CES Capital International (Hong Kong) Co., Limited for failing to discharge its duties as an investment manager of two funds.

In July 2022, RBC Investment Services (Asia) Limited was reprimanded and fined for improper handling of client assets. Concurrently, Rifa Futures Limited was given a penalty for inadequate due diligence and failure to implement secure login methods for clients’ internet trading accounts. KTF Capital Management Limited also received a fine for non-compliance with financial resources requirements, while Mr. Chan Ka Hey was banned from re-entering the industry for six months due to his deceptive practices on handling a customer’s signature.

Lastly, in August 2022, the SFC reprimanded and fined TC Capital International Limited and suspended its responsible officer for failing to discharge duties as the sponsor in connection with the HKEX IPO application for China Candy Holdings Limited. This case accentuated the need for sponsors to conduct reasonable due diligence and maintain proper records.

The period between May and August 2022 saw HKEX and SFC take a firm stance on corporate governance, internal control systems, and compliance with the HKEX Listing Rules. These disciplinary actions and enforcement efforts serve as a reminder for companies and directors to ensure they adhere to the relevant regulations and maintain high standards of corporate conducts.