Economic Times Correspondent, 13th - The Securities and Futures Commission (SFC) has taken action against two groups suspected of involvement in a fraudulent scheme aimed at creating a false or misleading appearance of demand for shares in initial public offerings (IPOs).
The SFC has also directed the Hong Kong Stock Exchange, under Rule 8(1) of the Securities and Futures (Listing) Rules, to suspend trading of ChaBaiDao (02555) shares effective from 9:00 a.m. today.
The SFC is highly concerned that ChaBaiDao's IPO may have been artificially manipulated to create a misleading appearance of demand for its shares. During the SFC's ongoing investigation, suspending trading in ChaBaiDao shares is necessary or appropriate to maintain an orderly and fair market for the stock and to protect the interests of the investing public.
Regarding the first suspicious group, the SFC has issued restriction notices to six brokerage firms, prohibiting them from disposing of or dealing with assets held in client accounts under Sun Ran and eight related companies (namely Avant Team Limited, Citadel Wealth Limited, Fortuna Capital Management Limited, Gemstone Capital Management Limited (not to be confused with another identically named Hong Kong entity licensed by the SFC), Generations Capital Management Limited, Panda Capital Management Limited, Prudent Wealth Global Inc, and Timeless Capital Management Limited), up to an amount of approximately HK$4.379 billion (the highest amount ever in a similar case by the SFC). The first suspicious group is suspected of involvement in fraudulent schemes related to the IPOs of BoCare Cloud (02592) and ChaBaiDao.
Regarding the second suspicious group, the SFC has issued restriction notices to 29 brokerage firms, prohibiting them from dealing with or disposing of assets held in client accounts under Liu Haoran, The Reynold Lemkins Group (Asia) Limited, and Kaufmann & Company Pan-Asia Limited (the three entities), up to an amount of approximately HK$285 million. This suspicious group is suspected of involvement in a fraudulent scheme related to the IPO of Tianjudihe (02479).
The suspicious groups are suspected of involvement in fraudulent schemes whereby part of the IPO proceeds may have been transferred away from the relevant companies, purportedly for investment in financial products, under undisclosed agreements between the listed companies and the groups. Such agreements may have facilitated the covert recycling of IPO proceeds back to the major IPO allottees or their associates. The brokerage firms receiving the restriction notices are not targets of the SFC's investigation. The restriction notices do not affect the operations of these brokerage firms or their other clients.
The SFC considers it desirable to issue these notices to preserve the relevant assets in the interest of protecting the investing public or the public interest. The parties involved may subsequently be ordered, through restitution proceedings, to compensate affected investors.
SFC Chief Executive Officer Ms. Julia Leung said that market integrity and soundness are the foundation for maintaining fair capital markets and investor confidence. The SFC maintains a zero-tolerance policy towards any form of IPO manipulation, price rigging, or creation of a false market. In practice, the SFC adopts highly focused and proportionate regulatory actions, striving to foster a favorable environment that promotes a virtuous cycle for sustainable market development. (bn)
The SFC has also directed the Hong Kong Stock Exchange, under Rule 8(1) of the Securities and Futures (Listing) Rules, to suspend trading of ChaBaiDao (02555) shares effective from 9:00 a.m. today.
The SFC is highly concerned that ChaBaiDao's IPO may have been artificially manipulated to create a misleading appearance of demand for its shares. During the SFC's ongoing investigation, suspending trading in ChaBaiDao shares is necessary or appropriate to maintain an orderly and fair market for the stock and to protect the interests of the investing public.
Regarding the first suspicious group, the SFC has issued restriction notices to six brokerage firms, prohibiting them from disposing of or dealing with assets held in client accounts under Sun Ran and eight related companies (namely Avant Team Limited, Citadel Wealth Limited, Fortuna Capital Management Limited, Gemstone Capital Management Limited (not to be confused with another identically named Hong Kong entity licensed by the SFC), Generations Capital Management Limited, Panda Capital Management Limited, Prudent Wealth Global Inc, and Timeless Capital Management Limited), up to an amount of approximately HK$4.379 billion (the highest amount ever in a similar case by the SFC). The first suspicious group is suspected of involvement in fraudulent schemes related to the IPOs of BoCare Cloud (02592) and ChaBaiDao.
Regarding the second suspicious group, the SFC has issued restriction notices to 29 brokerage firms, prohibiting them from dealing with or disposing of assets held in client accounts under Liu Haoran, The Reynold Lemkins Group (Asia) Limited, and Kaufmann & Company Pan-Asia Limited (the three entities), up to an amount of approximately HK$285 million. This suspicious group is suspected of involvement in a fraudulent scheme related to the IPO of Tianjudihe (02479).
The suspicious groups are suspected of involvement in fraudulent schemes whereby part of the IPO proceeds may have been transferred away from the relevant companies, purportedly for investment in financial products, under undisclosed agreements between the listed companies and the groups. Such agreements may have facilitated the covert recycling of IPO proceeds back to the major IPO allottees or their associates. The brokerage firms receiving the restriction notices are not targets of the SFC's investigation. The restriction notices do not affect the operations of these brokerage firms or their other clients.
The SFC considers it desirable to issue these notices to preserve the relevant assets in the interest of protecting the investing public or the public interest. The parties involved may subsequently be ordered, through restitution proceedings, to compensate affected investors.
SFC Chief Executive Officer Ms. Julia Leung said that market integrity and soundness are the foundation for maintaining fair capital markets and investor confidence. The SFC maintains a zero-tolerance policy towards any form of IPO manipulation, price rigging, or creation of a false market. In practice, the SFC adopts highly focused and proportionate regulatory actions, striving to foster a favorable environment that promotes a virtuous cycle for sustainable market development. (bn)
