Legal Update – MMT sanctions against China Forestry Holdings Company Limited CEO for market misconduct – order to disgorge HKD353,430,000

On 28 November 2024, the Securities and Futures Commission (“SFC”) announced that the Market Misconduct Tribunal (“MMT”) ordered:

1) Mr. Li Han Chun, the former chief executive officer of China Forestry Holdings Company Limited (“China Forestry”), formerly listed on the Main Board of the Stock Exchange of Hong Kong (Stock Code: 930); and

2) his investment vehicle, Top Wisdom Overseas Holdings Limited (“Top Wisdom”), 

to disgorge HKD353,430,000 which represents the loss they avoided by insider dealing of China Forestry’s shares.

The MMT also ordered that Mr. Li Han Chun and Top Wisdom pay compound interest on the disgorged sum of HKD353,430,000, calculated from 12 January 2011 with yearly rests, which is the date in which the insider dealing of China Forestry’s shares took place via a share placement.

The MMT further imposed the following orders against Mr. Li Han Chun and Mr. Li Kwok Cheong, the former chairman of China Forestry, due to the MMT’s findings that they disclosed false or misleading information in China Forestry’s IPO prospectus, annual results announcement and annual report for the year ended 31 December 2009 which induced transactions in China Forestry’s shares:

1) Disqualification orders for five (5) years (which prohibits them from being a director, liquidator, receiver or manager of the property or business of, or being concerned or taking part in the management of, any listed or unlisted corporation in Hong Kong, without leave of the court);

2) Cold shoulder orders for five (5) years (which prohibits them from dealing in any securities, futures contract, leveraged foreign exchange contract or collective investment scheme in Hong Kong, without leave of the court); and

3) Cease and desist orders which prohibit them from engaging in any conduct which constitutes market misconduct.

The MMT also ordered Mr. Li Han Chun, Mr. Li Kwok Cheong and Top Wisdom to pay the costs and expenses incurred by the Hong Kong Government and the SFC.

Commentary

The size of the disgorgement order is significant, and the prohibition period for the disqualification order and the cold shoulder order both represent the maximum periods permitted under the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong).

The severity of the orders imposed by the MMT against Mr. Li Han Chun, Mr. Li Kwok Cheong and Top Wisdom reflect the seriousness of the offences committed by them. This case serves as a useful reminder that the Hong Kong regulatory authorities would be willing to prosecute and impose harsh penalties on perpetrators of insider dealing and other market misconduct.

Russell Bennett and John Lee

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. This article was last updated on 02 December 2024.