Hong Kong's Securities And Futures Commission Commences Market Misconduct Tribunal Proceedings Over Alleged Insider Dealing In Warderly Shares

The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against Mr Lo Hang Fong, a former Company Secretary of Warderly International Holdings Limited (Warderly), and Mr Luu Hung Viet Derrick, a lender and potential investor of Warderly, for alleged insider dealing in Warderly shares (Notes 1 & 2).

The SFC alleges Lo and Luu were aware that Warderly was in a perilous financial position with banks withdrawing credit facilities when they sold the company’s shares in 2007 and avoided a total loss of $12,564,516.

The SFC further alleges that Lo and Luu knew the financial crisis facing Warderly was material, highly price sensitive and not generally known to the market.  

Warderly began to encounter cash flow problems in mid-2006 due to a surge in the price of raw materials and the settlement of a large tax claim from the Inland Revenue Department. From July 2006 onwards, Warderly experienced a number of material events concerning its financial position, including tightening of banking facilities and the subsequent events such as overdue loans, rescheduled payments, demand letters and writs issued by banks (Note 3).

Trading in Warderly shares was suspended by the SFC on 14 May 2007 (Note 4).

Notes:

1. Warderly was listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) in December 2002. Warderly changed its name to Fullshare Holdings Limited on 22 October 2014.
2. Lo was appointed as the Company Secretary of Warderly from the time it was listed in December 2002 until he resigned on 20 March 2007 while at the relevant time Luu was a lender and potential investor who was interested in acquiring the Warderly shareholding of the then Chairman and majority shareholder of Warderly and then restructuring Warderly.
3. Luu extended a loan to Warderly in February 2007 that carried an interest rate of 3% per month.
4. Under Rule 8 of the Securities and Futures (Stock Market Listing) Rules, the SFC directed the SEHK to suspend all dealings in the shares of Warderly on 14 May 2007. Trading in the shares of Warderly was resumed on 16 December 2013 after Warderly underwent a restructuring of its business operations and the change of its management team.
5. The Notice to the MMT which contains the statement setting out the grounds for commencing the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk).