Don’t be fooled by our regulators’ legal actions and strong words against Li Hejun, the controlling shareholder of the notorious Hanergy Thin Film Power Group. It is the roar of a lion chained down by the regulatory black box up north that makes investigations against mainland corporates impossible. The filing of civil action is telling. Li will not face criminal proceedings amid the thundering queries of whether Hanergy’s numbers and trading prices were genuine. Instead, he will be banned from any directorships in Hong Kong and pay Hanergy three billion yuan of receivables for the company, suspended since May 2015, to resume trading. This is the result of a three-month negotiation between Li and the Securities and Futures Commission. Such a “penalty” is disproportional to the damage Li has done to the reputation of Hong Kong, both internationally and at home. Hanergy is not merely a corporate governance case as described in the commission’s statement. It is not only about Li and four independent directors failing to question the viability of a business model that relied on sales to Hanergy’s parent; the financial position of the parent and the recoverability of the receivables due. Hanergy is much more than that. Such a ‘penalty’ is disproportional to the damage Li has done to the reputation of Hong Kong, both internationally and at home There is the question, asked by many including its auditor, of whether the company’s proclaimed three billion yuan sale of a solar panel production system to Li ever existed. There is also the question, raised by the Financial Times , of why Hanergy’s price would always rise in the last 10 minutes of trading and whether that supported the high leverage of Li who pledged his control of Hanergy as collateral. These have been the focus of a high-profile probe by the SFC since 2015. Yet, once they crossed the Lo Wu bridge linking Hong Kong to Shenzhen, investigators hit a dead end. Mainland banks are understood to have refused the commission access to the records of Hanergy’s parent. Those papers were necessary to verify the company’s cash flow and therefore its so-called buying from Hanergy. The SFC sought assistance from the China Securities Regulatory Commission, according to sources. The latter’s intervention was, however, in vain. Hostility of regional banks towards foreign regulators and insubordination to the domestic one is no news to any market veteran. They are more loyal to their key borrowers – whose survival matters to their bad-debt levels – than to a mainland securities regulator who has no jurisdiction over them. Meanwhile, a probe into the peculiar trading of Hanergy also hit a wall, given that a significant part of the orders originated from mainland China. Hong Kong investigators had difficulties finding out the genuine benefactors of buy or sell orders in order to establish any link with Li. With the fraud and market manipulation investigations going nowhere, civil litigation was the commission’s only option. Li is under pressure from lenders to have Hanergy resume trading as soon as possible. The watchdog would like to see the financial damage to the key victim, Hanergy, addressed. Hence, the SFC’s civil actions and Li’s agreement not to contest. Nobody is ready to call this a settlement. The commission emphasised in its statement and to journalists that there is no assurance of trading resumption. Indeed. Other than Li’s abstaining from the market and repayment, Hanergy also has to make a disclosure that satisfies the commission before it resumes trading. It won’t come easy. But that is beside the point. Hanergy is proof yet again of how little our regulators can do when it comes to mainland enterprises. Of course, the SFC can argue that it has at least managed to disqualify Li and four independent directors from holding directorships and get Li to agree to pay up. The controlling shareholders and chairmen of China Forestry and China Metal Recycling faced no such consequences despite proven frauds. The problem is the “improvement” happened not because of any additional legal protection but Li’s desire to have a listed firm trading. There is nothing encouraging here.