Hong Kong's Securities And Futures Commission Suspends Eric Shum Kam Chi For Three Years For Sponsor Failures

The Securities and Futures Commission (SFC) has suspended Mr Eric Shum Kam Chi as a representative in all regulated activities and withdrawn approval for him to act as a responsible officer for three years from 15 September 2014 to 14 September 2017 for serious deficiencies in the sponsor work relating to the listing of Sino-Life Group Limited (Sino-Life) on the Growth Enterprise Market (GEM) of The Stock Exchange of Hong Kong Limited (SEHK) (Note 1).

Shum was previously a responsible officer and sponsor principal of Sun Hung Kai International Limited (Sun Hung Kai International) which acted as the sole sponsor for Sino-Life.

An SFC investigation revealed that Sun Hung Kai International had failed to conduct proper due diligence between October 2007 and September 2009 on Sino-Life’s business in relation to a number of material issues, and had placed undue reliance on the work delegated to external experts. Disciplinary action against Sun Hung Kai International was taken in January 2014 (Note 2).

Sun Hung Kai International’s regulatory breaches are attributable to Shum who failed to discharge his duties as its senior management. In summary, the SFC found that Shum as head of the firm’s transaction team had failed to:

• assess the accuracy and the completeness of the information submitted by Sino-Life to demonstrate that it satisfied the financial requirements to list on the GEM;
• ascertain the existence of various encumbrances on the title of a major business deal of Sino-Life in Taiwan;
• properly assess the business of the Sino-Life’s wholly-owned subsidiary in Taiwan;
• ensure true, accurate and complete disclosure was made to the SEHK and in Sino-Life’s prospectus and breached the sponsor undertaking to the SEHK by filing untrue statements in the sponsor declaration; and
• keep proper books and records in relation to the sponsor work conducted. 

Shum sought to review the SFC’s decision at the Securities and Futures Appeals Tribunal (SFAT) but withdrew his application before the SFAT hearing. 

In deciding the penalty, the SFC took into account that although Shum had knowledge of the fact that Sun Hung Kai International was selective in its disclosure to the SEHK during the listing process, he still signed the sponsor declaration thereby holding out that all information submitted to the SEHK was true, accurate and complete to his knowledge. The SFC also took into account his otherwise clean disciplinary record.

Notes:

1. Shum is licensed under the Securities and Futures Ordinance to carry on Type 6 (advising on corporate finance) regulated activity and was accredited to Sun Hung Kai International between 29 March 2000 and 10 July 2010. Shum is not currently accredited to any principal.
2. Please see the SFC’s press release dated 27 January 2014 and the Reasons for Determination which is available on the Securities and Futures Appeals Tribunal’s website (http://www.sfat.gov.hk/).