The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against former chairman of Asia TeleMedia Limited (ATML) (now known as Reorient Group Limited), Mr Lu Ruifeng, and three former executives Mr Yiu Hoi Ying, Ms Marian Wong Nam and Ms Cecilia Ho King Lin for alleged insider dealing in the securities of ATML between 1 February and 6 June 2007 (Note 1).
On 6 June 2007, Goodpine Ltd (Goodpine) served a winding up petition on ATML, alleging that ATML was indebted to and had failed to satisfy Goodpine of a debt of approximately $70,270,000 including interest as at 26 April 2007. Goodpine was taking action to recover the debt after a previous ATML creditor had assigned the debt to Goodpine. At the time, ATML had more liabilities than assets and enforcement of the debt would make the company insolvent.
The SFC alleges that Lu, Yiu, Wong and Ho were aware of the assignment of the debt from the previous creditor to Goodpine and the action taken by Goodpine to recover the debt. The SFC further alleges that this information was not publicly known and was material to ATML’s share price, and that Lu, Yiu, Wong and Ho each sold ATML shares before the information was disclosed to the public in ATML’s announcement on 15 June 2007 and avoided a total combined loss of $50,898,121.
The SFC’s statement for the institution of proceedings, published on the MMT website, sets out the grounds on which the SFC has initiated these proceedings (Note 2).
The SFC first initiated proceedings in relation to this case in April 2008 under section 213 of the Securities and Futures Ordinance and obtained an injunction against Lu and a number of parties who allegedly acted as Lu’s nominees to freeze assets up to $43,661,568 which the SFC alleges represent the loss Lu avoided by his insider dealing.
One of those parties, Kayden Ltd (Kayden), appealed to the Court of Final Appeal, which set aside the order made against Kayden and discharged the injunction against it. The orders against the other parties remain on foot. The SFC’s proceedings against Lu and these other parties are continuing (Note 3).
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Notes:
- ATML was listed on The Stock Exchange of Hong Kong Limited in July 1987. It is a securities broker, underwriter, asset manager, share margin financier and investment holding company. ATML went into liquidation and trading in its shares was suspended after the High Court granted a winding up order on 18 March 2008. Subsequently on 15 April 2011, a restructuring plan for ATML was agreed between the company, the liquidators, a new investor and a guarantor. The scheme was approved at the scheme creditors’ meeting on 21 July 2011 and sanctioned by the High Court on 2 August 2011. Trading in ATML shares resumed on 10 August 2011. ATML remains listed under a new name, Reorient Group Limited.
- The Notice to the MMT which contains the statement setting out the grounds for commencing the MMT proceedings is available on the MMT website (www.mmt.gov.hk).
- Please see the SFC’s press releases dated 2 May 2008, 5 November 2008 and 6 December 2010.
