Hong Kong markets watchdog to sue 60 companies and individuals for corporate fraud in first half of 2019
Legal action by Securities and Futures Commission will be the largest in its 30-year history
Hong Kong’s Securities and Futures Commission plans to take legal action against 60 listed companies and individuals in the first half of 2019, in what will be the largest legal action ever undertaken by the markets watchdog since its establishment in 1989, executive director Thomas Atkinson told the 2018 Refinitiv Pan Asian Regulatory Summit in the city on Wednesday.
The commission’s corporate fraud team has investigated 236 cases over the past two years, of which 28 were found to be particularly serious. Atkinson said some serious cases involved nefarious networks of listed companies, company directors and money lenders colluding to hide the real ownership of shareholdings in listed firms, as well as to conceal misconduct and malpractice that included the theft of assets from these companies.
He said he expected the investigation would be completed by the end of this year. “After a reorganisation two years ago [that helped us] close the smaller, less important cases, these important, big cases are our top priority,” Atkinson told the summit.
The SFC is working with the Independent Commission Against Corruption, said Atkinson, and had suspended 14 listed companies, searched 200 offices and residential premises and collected more than 4,000 pieces of evidence, including phones and computers, so far.
In their largest corporate inquiry so far, starting in December 2017, the two commissions investigated Convoy Global Holdings and a number of related listed companies, and arrested its chairman, Quincy Wong Lee-man, as well as three of its former executives.
Atkinson also said the commission has been investigating 28 investment banks that have acted as listed sponsors to help companies go public, and had found their work was of poor quality. And while Hong Kong may have reclaimed the IPO crown in the first nine months of this year, Atkinson said 39 listing applications had been found to be substandard. The commission had rejected some of these applications and penalised nine sponsors.
He said the SFC would continue to penalise those who were in breach of its rules. “You may have noticed we have meted out significantly larger fines this year. The aggregate fines imposed for the whole of last year were around HK$63 million [US$8.04 million]. This year we have already imposed HK$191 million in financial penalties. Of course, this comparison excludes the HK$400 million fine paid by HSBC last year,” said Atkinson.
“We understand that bigger fines do not necessarily equate with better deterrence, but in our case, it does illustrate that we are ‘on strategy’. As we focus on the more serious matters impacting the investing public, the size of our fines has naturally increased as well.”