The securities regulator was on the brink of shutting down CA Pacific's business six months before the brokerage's 1998 collapse, which left thousands of investors claiming billions of dollars, it emerged yesterday. The Securities and Futures Commission (SFC) carried out an inspection of the CA Pacific Group in July 1997 and expressed concerns over its operations, including its credit lending policy. The regulator was going to apply a restriction notice to the securities arm, which would deter it from carrying on its business in whole or part. However, no action was taken after CA Pacific boss Jason Wong But-sit proposed an increase in the group's share capital and the appointment of external auditors to referee large payments from the companies. Mr Wong now faces being banned from running a company for up to 15 years after he transferred $248 million from CA Pacific Finance as a deposit on a $1.24 billion property in Central without the consent of the auditor, board members and shareholders, and to the detriment of CA Pacific. The purchase took place just before the October 1997 stock market crash. Banks called in debts and CA Pacific went under, sparking street protests by investors whose shares held by the brokerage arm were used as collateral and sold by banks when CA Pacific Finance failed to repay its debts. A total of 5,212 claimants sought $2.4 billion. The actual loss was later quantified by the SFC as $938 million. The aftermath of the group's collapse was protracted and expensive, with liquidators forced to go to court to determine how to distribute clients' shares and the SFC hit with its biggest net loss of $200 million after paying CA Pacific investors from its compensation fund. Asked if it had any regrets for not giving CA Pacific a restriction notice, the SFC stressed the problems were primarily concerned with the margin finance arm, which was not subject to regulation. 'The SFC took the necessary regulation action to protect investors as soon as possible.' In February 2000, Mr Wong was acquitted by a jury of stealing $248 million from CA Pacific Finance but received a two-year suspended jail term for false accounting. Yesterday in the High Court, he was dubbed a 'menace to the public, especially the investing public' by the legal counsel for the Official Receiver's Office, Godfrey Lam. One of the arguments put forward for barring him from being a director was that he misled the SFC. 'Mr Wong made a number of proposals to the SFC and the matter was left at that,' Mr Lam said. The $248 million transfer was 'contrary to the proposals made to the SFC'. Mr Lam noted: 'The SFC was going to apply a restriction notice ... it may be as a regulator their power to discipline would only apply to [CA Pacific] Securities, but it was the whole basis on which the SFC ... took no action in 1997.' Mr Wong did not contest the disqualification application, but claimed that at the time of the group's collapse, it was not insolvent, but was a victim of the Asian financial crisis and the stock market plunge. He told the court: 'I did not take any money away from the system for the benefit of my own.' The case continues today.