The Securities and Futures Commission has, for the first time under the dual-filing system, successfully prosecuted a firm for providing false or misleading information.
Huafeng Textile International Group and its director, Cai Yang Bo, have been fined $50,000 each.
Mr Cai is the son of founding chairman Cai Zhen Rong. The company and Mr Cai pleaded guilty yesterday before Ian Candy at Eastern Magistracy for contravening the disclosure law.
Mr Candy also ordered them to pay a total of $28,000 to the SFC to cover the costs of the investigation. The maximum penalty for the offence is a $100,000 fine and a year in jail.
The dual-filing system allows the SFC to work with the stock exchange to vet listing prospectuses and company announcements in order to prosecute cheats. The investigation found that on July 23 last year, Huafeng issued a statement claiming the board of directors did not know the reason for an increase in both share price and trading volume in the morning. Mr Cai had triggered the fluctuations by selling 25.6 million Huafeng shares owned by him and other Huafeng directors.
Mr Cai did not disclose the sale to Huafeng until two days after the transaction, by which time the firm had released a second fraudulent announcement. The company issued an accurate clarification of events only on July 31.