Hong Kong's Securities And Futures Commission Fines Quam Capital Limited $800,000 Over Sponsor Failures

The Securities and Futures Commission (SFC) has fined Quam Capital Limited (Quam) $800,000 for failing to discharge its duties as a sponsor in relation to the listing of Gayety Holdings Limited (Gayety) (now known as Food Idea Holdings Limited) on the Growth Enterprise Market (GEM) of The Stock Exchange of Hong Kong Limited (SEHK) in July 2011 (Notes 1 & 2).

The SFC found that Quam breached the SFC’s Code of Conduct and the Corporate Finance Adviser Code of Conduct for its failure to act with due skill, care and diligence when preparing Gayety’s prospectus (Notes 3 & 4). 

Specifically, the prospectus stated that none of the directors of Gayety had any interest in four of its five largest suppliers during the track record period.  However, one of these suppliers was owned by two directors of Gayety who were also its chairman and chief executive officer, respectively. 

The prospectus also wrongly represented that none of the key suppliers had ceased supply to Gayety and its group companies when in fact the arrangement with one supplier had discontinued by the end of the track record period. 

In preparing the listing application, Gayety had disclosed to Quam the information relating to the ownership of the supplier and the status of the business relationship between Gayety and the supplier.  Accordingly, the inaccuracy was not the result of any information withheld by Gayety.

There is insufficient evidence to establish these matters constitute materially false or misleading statements, in which case, the action taken would have been different with the sponsor facing both criminal and civil responsibility.  Nonetheless, these matters are inconsistent with the standards required of sponsors in Hong Kong.

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Notes:

1. Quam is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 6 (advising on corporate finance) regulated activity. 
2. Gayety was listed on the GEM of the SEHK on 8 July 2011 with Quam as its sole sponsor.  The prospectus was issued on 30 June 2011.
3. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
4. Corporate Finance Adviser Code of Conduct (April 2003).