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The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against Mayer Holdings Limited (Mayer) for failing to disclose price sensitive information as soon as reasonably practicable (Note 1).
The SFC has also commenced proceedings in the MMT against the company’s 10 current and former senior executives for their reckless or negligent conduct causing the alleged breach by Mayer of the provisions of the statutory corporate disclosure regime.
They include Mayer’s former chairman and executive director, Mr Hsiao Ming-chih; former company secretary and financial controller, Mr Chan Lai Yin Tommy; former executive directors, Mr Lai Yueh-hsing, Mr Chiang Jen-Chin, Mr Lu Wen-yi and Mr Xue Wenge; former independent non-executive directors, Mr Huang Jui-hsiang, Mr Lin Sheng-bin and Mr Alvin Chiu; and non-executive director, Mr Li Deqiang.
The SFC found that between April and August 2012, while auditing Mayer’s financial statements for the year ended 31 December 2011, the then auditors of Mayer repeatedly communicated with Mayer’s management about issues they identified including:
- the suspicious nature of the disposal of a wholly-owned subsidiary of Mayer, for HK$15.5 million;
- Mayer did not control projects in Vietnam, which it bought for HK$620 million, and their valuations appeared to have been inflated; and
- two subsidiaries of Mayer’s jointly controlled entity had made substantial prepayments of US$10 million and US$4 million respectively without security to suppliers which appeared to be irrecoverable (collectively, outstanding audit issues).
On 23 August 2012, Mayer’s then auditors indicated that they would qualify their audit opinion for the financial statements for the year ended 31 December 2011 if the outstanding audit issues were not resolved (potential qualified audit report).
On 27 December 2012, Mayer received a resignation letter from its then auditors. But, Mayer only disclosed the auditors’ resignation together with brief details of the outstanding audit issues on 23 January 2013.
The SFC alleges that the auditors’ resignation, the outstanding audit issues together with the potential qualified audit report and the US$10 million prepayment to the supplier were specific information regarding Mayer, price sensitive and not generally known to the public at the material time. The information would also have been viewed negatively by the investors and were of sufficient gravity to affect the share price of Mayer.
Notes:
- Mayer was listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) in June 2004. Trading in the shares of Mayer has been suspended since 9 January 2012.
- A copy of 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).
