Hong Kong SFC Suspends ex-Responsible Officer of China On Securities Wong Ka Ching for 4 Years for Failures & Negligence as Placement Agent of Majority Shareholder to Subscribe for 45% Shares of Hon Corp Total Issued Capital in 2019, Failed to Act Within Scope of Authority & Safeguard Majority Shareholder Assets, Disclosed SFC Investigation & Providing Misleading Information to Hong Kong SFC
29th May 2024 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has suspended the ex-responsible officer of China On Securities Wong Ka Ching for 4 years for failures & negligence as placement agent of a majority shareholder to subscribe for 45% shares of Hon Corp total issued capital in 2019, including failing to act within scope of authority & safeguard majority shareholder assets, disclosing Hong Kong SFC investigation & providing misleading information to Hong Kong SFC. Hong Kong SFC (28/5/24): “The Securities and Futures Commission (SFC) has suspended Mr Wong Ka Ching, former responsible officer (RO) of China On Securities Limited (China On), for four years from 28 May 2024 to 27 May 2028 (Note 1). The disciplinary action follows the SFC’s sanctions against China On over its failures as the placing agent in a share placement between 25 November and 6 December 2019 (Note 2). The SFC considers China On’s failures occurred with Wong’s consent or connivance, or were attributable to neglect on Wong’s part, as an RO and a member of the senior management of China On. The SFC also finds that Wong acted in gross negligence or recklessly in handling the share placement and failed to ensure the maintenance of appropriate standards of conduct and adherence to proper procedures by China On. The SFC’s investigation found that China On, as placing agent of the then majority shareholder (vendor) of Hon Corporation Limited (Hon Corp) to procure placees to subscribe for 45% of Hon Corp’s total issued share capital, failed to ensure that it acted within the scope of the vendor’s authority and adequately safeguard the vendor’s assets (Notes 3 and 4).” More info below:
“ Hong Kong SFC Suspends ex-Responsible Officer of China On Securities Wong Ka Ching for 4 Years for Failures & Negligence as Placement Agent of Majority Shareholder to Subscribe for 45% Shares of Hon Corp Total Issued Capital, Failed to Act Within Scope of Authority & Safeguard Majority Shareholder Assets, Disclosed SFC Investigation & Providing Misleading Information to Hong Kong SFC “
In particular, upon identifying six placees for the placement, China On:
- entered into bought and sold notes relating to the shares on the vendor’s behalf with the placees, but the transaction prices therein were inconsistent with the placing price agreed with the vendor (Note 5);
- transferred the shares to the placees without first requiring payment of the purchase price or the certainty that they would be able to make payment of the placing price to the vendor (Note 6); and
- executed a purported instruction by a third party for part of the shares to be transferred to one of the placees for free without verifying the instruction with the vendor.
In addition, the SFC found that Wong:
- allowed an individual, a purported consultant of China On, to be heavily involved in the operations of China On without ensuring that he was fit and proper or otherwise qualified to act in such capacity;
- disclosed confidential contents of the SFC’s investigation to this individual; and
- knowingly provided false or misleading information to the SFC about the same individual.
In deciding the sanction, the SFC has taken into account all relevant circumstances, including that:
- there is insufficient evidence to support any finding of dishonesty against Wong or the misconduct in question is recurrent;
- Wong’s disclosure of the details about the SFC’s investigation to the above-mentioned individual created a risk of jeopardising the SFC’s investigation;
- the importance of sending a deterrent message to the industry that the SFC will not tolerate any grossly negligent or reckless conduct;
- the gravity of breaches to the secrecy obligation and of providing materially false or misleading information to the SFC, in particular by a licensed person; and
- Wong’s otherwise clean disciplinary record.
Notes:
- Wong was accredited to China On and approved to act as its RO for Type 1 (dealing in securities) regulated activity between 6 April 2017 and 28 February 2021 and Type 9 (asset management) regulated activity between 9 July 2018 and 28 February 2021. Wong is currently not accredited to any licensed corporation.
- China On (previously known as China Fund Securities Limited) was reprimanded and fined $6 million by the SFC. Please refer to the SFC’s press release dated 18 May 2023.
- Hon Corp was listed on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited until its listing status was cancelled with effect from 22 June 2022.
- Under the placing agreement between China On and the vendor, China On agreed: (a) to procure, as the vendor’s agent, not less than six placees to subscribe for 216 million Hon Corp shares at $0.265 per share (the total agreed placing price amounted to $57.24 million); and (b) when completion takes place, all (but not part only) of a series of businesses shall be transacted, including: (i) China On should pay, or procure the placees to pay, to the vendor the aggregate placing price; and (ii) the vendor should allot the shares to the placees.
- The bought and sold notes were contract notes executed by the vendor and the respective placees to effect the sale of the shares from the vendor to the respective placees. The bought and sold notes contained the date of sale and purchase and name, quantity and consideration of the stock sold and purchased.
- On 21 January 2020, the SFC issued a restriction notice to China On, prohibiting it from dealing with assets held in six client accounts, which were related to suspected market manipulation in the shares of Hon Corp. China On was subsequently unable to collect the purchase price from the placees, and failed to pay the same to the vendor. Please see the SFC’s press release dated 21 January 2020.
A copy of the Statement of Disciplinary Action is available on the SFC website
Hong Kong SFC Fines China On Securities $766,000 for Negligence as Share Placement Agents for Majority Shareholder of Hon Corp in 2019 with Transaction Prices Differing from Agreed Price Including Transferring Shares for $0, Received Trading Prohibition Notice on $21.7 Million of Hon Corp Shares for Suspected Market Manipulation in 2020
18th May 2023 – The Hong Kong Securities & Futures Commission (SFC) has fined China On Securities $766,000 (HKD 6 million) for negligence & reckless conduct as share placement agents for majority shareholder of Hon Corp in 2019 with transaction prices differing from agreed price including transferring shares for $0 (free). In 2020, China On Securities (renamed as China Fund Securities) received a trading prohibition notice on $21.7 million (HKD 170 million) of Hon Corp shares for suspected market manipulation. See below for more info.
SFC reprimands and fines China On Securities Limited $6 million for failures as share placement agent
18th May 2023 – The Securities and Futures Commission (SFC) has reprimanded and fined China On Securities Limited (China On) $6 million over its failures as the placing agent in a share placement between 25 November and 6 December 2019 (Note 1).
On 25 November 2019, China On was appointed as the placing agent by the then majority shareholder (Vendor) of Hon Corporation Limited (Hon Corp) to procure placees to subscribe for shares representing up to 45% of Hon Corp’s total issued share capital (Notes 2 & 3).
The SFC’s investigation found that upon identifying six placees for the placement, China On failed to ensure that it acted within the scope of the Vendor’s authority and adequately safeguard the Vendor’s assets by:
- entering into bought and sold notes relating to the shares on the Vendor’s behalf with the placees, but the transaction prices therein were inconsistent with the placing price agreed with the Vendor (Note 4);
- transferring the shares to the placees without first requiring payment of the purchase price or the certainty that they would be able to make payment of the placing price to the Vendor (Note 5); and
- executing a purported instruction by a third party for part of the shares to be transferred to one of the placees for free without verifying the instruction with the Vendor.
The SFC is of the view that China On’s disregard of the Vendor’s interests constituted gross negligence, if not recklessness, in breach of the Code of Conduct (Notes 6 & 7).
In deciding the sanction, the SFC has taken into account all relevant circumstances, including, there is insufficient evidence to support any finding of dishonesty against China On or the misconduct in question had been recurrent, the importance of sending a deterrent message to the industry that the SFC will not tolerate any grossly negligent or reckless conduct, and the otherwise clean disciplinary record of China On.
Notes:
- China On was known as China On Global Capital Group Limited from 22 July 2020 to 19 February 2021, Pan Asia Financial Services Limited from 30 May 2020 to 21 July 2020, China Fund Securities Limited from 10 May 2019 to 29 May 2020 and Hong Kong Wealthy Trade Limited before 10 May 2019. It is licensed to carry on Type 1 (dealing in securities) and Type 9 (asset management) regulated activities.
- Hon Corp was listed on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited until its listing status was cancelled with effect from 22 June 2022.
- Under the placing agreement between China On and the Vendor, China On agreed: (a) to procure, as the Vendor’s agent, not less than six placees to subscribe for 216 million Hon Corp shares at $0.265 per share (the total agreed placing price amounted to $57.24 million); and (b) when completion takes place, all (but not part only) of a series of businesses shall be transacted, including: (i) China On should pay, or procure the placees to pay, to the Vendor the aggregate placing price; and (ii) the Vendor should allot the shares to the placees.
- The bought and sold notes were contract notes executed by the Vendor and the respective placees to effect the sale of the shares from the Vendor to the respective placees. The bought and sold notes contained the date of sale and purchase and name, quantity and consideration of the stock sold and purchased.
- On 21 January 2020, the SFC issued a restriction notice to China On, prohibiting it from dealing with assets held in six client accounts, which were related to suspected market manipulation in the shares of Hon Corp. As a result, China On was unable to collect the purchase price from the placees, and failed to pay the same to the Vendor. Please see the SFC’s press release dated 21 January 2020.
- Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
- Please refer to the Statement of Disciplinary Action for the relevant provisions of the Code of Conduct.
Hong Kong SFC issues restriction notice to a broker to freeze client accounts linked to suspected market manipulation
21st Jan 2020 – The Securities and Futures Commission (SFC) has issued a restriction notice to China Fund Securities Limited (CFSL), prohibiting it from dealing with or processing $170 million worth of assets held in six client accounts, which are related to suspected market manipulation in the shares of Hon Corporation Limited between November 2019 and early December 2019 (Note 1).
The restriction notice prohibits CFSL, without the SFC’s prior written consent, from disposing of or dealing with, assisting, counselling or procuring another person to dispose of or deal with any assets in any way in the client accounts including: (i) entering into transactions for any securities; and/or (ii) processing any withdrawals or transferring of securities and/or cash arising from the disposal of securities; and/or (iii) disposing of or dealing with any securities or cash on the instructions of any authorized person of the Client Accounts or by any person acting on their behalf; and/or (iv) assisting another person to dispose of or deal with any relevant property in a specified manner. CFSL is also required to notify the SFC if it receives any of these instructions.
The SFC considers that the issue of the restriction notice is desirable in the interest of the investing public and in the public interest. The SFC’s investigation is continuing.
Notes:
- The SFC issued the restriction notice pursuant to sections 204 and 205 of the Securities and Futures Ordinance (SFO).
- CFSL is a corporation licensed under the SFO to carry on business in Type 1 and 9 regulated activities.
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