HK regulator imposes $6M fine on China On Securities Limited
The Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined China On Securities Limited $6 million over its failures as the placing agent in a share placement between 25 November and 6 December 2019.
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.
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;
- 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; 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 has concluded that China On’s disregard of the Vendor’s interests constituted gross negligence, if not recklessness, in breach of the Code of Conduct.
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 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.