The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against Yorkey Optical International (Cayman) Limited (Yorkey) for failing to disclose price sensitive information as soon as reasonably practicable (Note 1).
The SFC has also commenced proceedings in the MMT against Mr Nagai Michio, the Chief Executive Officer and Executive Director of Yorkey, and Mr Ng Chi Ching, Financial Controller and Company Secretary of Yorkey, for their reckless or negligent conduct causing the alleged breach by Yorkey of the provisions of the statutory corporate disclosure regime or their failure to take all reasonable measures from time to time to ensure that proper safeguards exist to prevent the alleged breach (Note 2).
The SFC found that, contrary to the published expectations of Yorkey’s management of significant growth and increasing profitability for the second half of 2012 as compared to the first half of 2012, Yorkey in fact sustained material losses in the second half of 2012 and its financial performance deteriorated significantly with the result that there was a substantial year-on-year decline in its 2012 profits on a full-year basis (Note 3).
The information about Yorkey’s material losses in the second half of 2012 and the significant deterioration in its financial performance were apparent from the figures contained in the internal management accounts. These figures would have been a clear indication to the senior management of Yorkey that the results for the second half of 2012, and hence the full year of 2012, would be much worse than expected. This information came to the knowledge of Yorkey and its CEO from around mid-December 2012 or mid-January 2013 at the latest. However, it was not disclosed to the public until the publication of Yorkey’s audited annual results for the year ended 31 December 2012 (2012 Final Results) on 25 March 2013.
The SFC alleges that the information about Yorkey’s material losses in the second half of 2012 and the significant deterioration in its financial performance was specific information regarding Yorkey, price sensitive and not generally known to the public at the material time. Had the information been known to the investing public, it would be likely to materially affect the share price of Yorkey (Note 4).
Notes:
- Yorkey was listed on the Main Board of The Hong Kong Stock Exchange on 10 February 2006.
- The statutory corporate disclosure regime under the Securities and Futures Ordinance came into effect on 1 January 2013.
- Yorkey recorded a net profit of US$1.25 million in its unaudited interim results for six months ended 30 June 2012 and a net profit of US$60,000 in its 2012 Final Results. The net profit of US$60,000 for 2012 represented a decline of 99% when compared to the net profit of US$6.685 million in 2011.
- The share price of Yorkey fell 21.25% over a three-day period from HK$0.80 on 25 March 2013 to HK$0.63 on 28 March 2013.
- A copy of the SFC’s Notice commencing the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk).
