The Securities and Futures Commission (SFC) has reprimanded and fined Adamas Asset Management (HK) Limited (Adamas) $2.5 million for inadequate measures to ensure accurate and timely disclosure of notifiable interests in eight Hong Kong-listed company shares (Note 1).
The SFC found that between February 2013 and March 2016, Adamas had failed to disclose to The Stock Exchange of Hong Kong Limited (SEHK) and the relevant listed companies all notifiable interests in the shares of these Hong Kong-listed companies in the client portfolios it managed by filing 339 disclosure notices incorrectly or late (Notes 2 & 3).
The SFC considers Adamas had failed to implement appropriate procedures to ensure proper disclosure of notifiable interests in Hong Kong-listed corporations as required by the Code of Conduct (Notes 4 & 5).
In deciding the sanctions, the SFC took into account:
- the duration and extent of Adamas’ failures;
- Adamas made a self-report to the SFC upon discovery of its disclosure failings;
- Adamas has taken remedial measures to improve its systems and controls; and
- Adamas’ otherwise clean disciplinary record.
Adamas applied to the Securities and Futures Appeals Tribunal (SFAT) for a review of the SFC’s sanction on 11 September 2019. Subsequently, Adamas discontinued its application and an order for costs was granted by the SFAT in favour of the SFC on 20 December 2019 (Note 6).
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Notes:
- Adamas is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 9 (asset management) regulated activity.
- At the material time, Adamas acted as an investment manager and/or investment advisor for a number of funds and invested in Hong Kong-listed shares on behalf of the funds.
- Part XV of the SFO sets out the requirements for the disclosure of interests in the securities of listed corporations. A person who acquires an interest in or ceases to be interested in voting shares in a listed corporation, or a change occurs affecting a person’s existing interest in shares in a listed corporation in specified circumstances, comes under a duty of disclosure. The specified circumstances are those where the person first acquires a notifiable interest, ceases to have a notifiable interest, has a notifiable interest but the percentage levels of his interest have changed or has a notifiable interest but the nature of his interest has changed. The notifiable percentage level for notifiable interests is 5% and the specified percentage level for changes to notifiable interests is 1%. Notification should be given to the SEHK and the listed corporation within three business days after the day on which the relevant event occurs.
- General Principle 7 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that a licensed corporation should comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of clients and the integrity of the market.
- Paragraph 12.1 of the Code of Conduct provides that a licensed corporation should comply with, and implement and maintain measures appropriate to ensuring compliance with the law, rules, regulations and codes administered or issued by the SFC.
- Please see SFAT Application No. 2 of 2019 published on the SFAT’s website at www.sfat.gov.hk.
A copy of the Statement of Disciplinary Action is available on the SFC’s website
