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The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against China Medical & Healthcare Group Limited for allegedly failing to disclose information in relation to its significant gains in securities trading as soon as reasonably practicable in 2014.
China Medical & Healthcare Group Limited was known as COL Capital Limited (COL) when the alleged breach of the statutory corporate disclosure requirements regime occurred (Note 1).
The SFC has also commenced proceedings in the MMT against six individuals who were COL’s directors at the material time for their reckless or negligent conduct causing the alleged breach.
They are: Ms Chong Sok Un, COL’s Chairman and Executive Director; Mr Wong Peng Chong and Mr Kong Muk Yin, COL’s Executive Directors; Mr Lau Siu Ki, Mr Ma Wah Yan and Mr Zhang Jian, COL’s Independent Non-Executive Directors (collectively, COL Directors).
The SFC’s investigation found that COL’s internal financial report for March 2014, which was made available to the COL Directors in April 2014, stated, amongst other things, that COL made a profit of around $360 million in March, bringing the cumulative profit for the nine months ended 31 March 2014 to around $894 million, in comparison to a loss of around $33 million for the same period ended 31 March 2013.
However, COL did not disclose this information until 10 September 2014 when it issued a profit alert announcement in which it stated that COL and its subsidiaries expected to record a substantial profit attributable to shareholders approximately between $840 million and $980 million for the year ended 30 June 2014.
COL’s share price rose 12.39 per cent to close at $2.63 on 11 September 2014 following the profit alert announcement.
The SFC also found that the significant gains reflected in the COL’s March financial report was contributed by its investment in the shares of ChinaVision Media Group Limited (ChinaVision), now known as Alibaba Pictures Group Limited.
Specifically, COL made significant gains from its trading in ChinaVision shares between 12 March 2014 and 18 March 2014 after ChinaVision shares jumped 186 per cent to close at $1.83 after trading resumption on 12 March 2014 following the company’s announcement on 11 March 2014 on a plan to allocate around 12 billion new shares to Alibaba Investment Limited.
However, COL did not disclose the information pertaining to the gains from trading in ChinaVision shares, nor its March 2014 profit figures to the public, until 10 September 2014 when it issued the profit alert.
The SFC alleges that the information pertaining to the gains from trading in ChinaVision shares or the March 2014 profit figures was specific information regarding COL and not generally known to the persons who were accustomed to or would be likely to deal in the listed securities of COL. Had the information been generally known to them, it would have been likely to materially affect the share price of COL.
Notes:
- COL was listed on the Main Board of the Stock Exchange of Hong Kong Limited on 1 August 1991 and its name was changed to China Medical & Healthcare Group Limited on 29 February 2016.
- The financial report showed that the company recorded:
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- a loss of around $32,600,000 for the nine months ended 31 March 2013, in comparison to a cumulative profit of $893,600,000 for the corresponding period ended 31 March 2014;
- a profit of $360,017,000 in March 2014, of which $337,647,000 originated from the Securities Investment Segment;
- a realised gain on disposals of $136,067,000 in March 2014 from the stock portfolio of its wholly-owned subsidiary through which shares of ChinaVision were held, of which $129,954,000 was contributed by the disposal of ChinaVision shares;
- a realised gain of around $144,500,000 in March 2014 from its stock portfolio, of which around $130,000,000 was attributed to dealings in ChinaVision; and
- an unrealised gain of $249,800,000 from its stock portfolio, of which $229,100,000 was attributed to its holdings in ChinaVision shares.
3. A copy of the SFC’s Notice commencing the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk).
