The Market Misconduct Tribunal (MMT) today found that Mayer Holdings Limited (Mayer) and nine of its current and former senior executives failed to disclose inside information as soon as reasonably practicable as required under the Securities and Futures Ordinance (SFO) following proceedings brought by the Securities and Futures Commission (SFC) (Notes 1 & 2).
The current and former senior executives of Mayer who were found in breach of the corporate disclosure requirements are: former chairman and executive director, Mr Hsiao Ming-chih; former company secretary and financial controller, Mr Chan Lai Yin Tommy; former executive directors, Mr Lai Yueh-hsing, Mr Chiang Jen-Chin and Mr Xue Wenge; former independent non-executive directors, Mr Huang Jui-hsiang, Mr Lin Sheng-bin and Mr Alvin Chiu; and current non-executive director, Mr Li Deqiang.
The MMT was told that between April and August 2012, Mayer’s auditors at the material time repeatedly communicated with the management about issues they identified while auditing Mayer’s financial statements for the year ended 31 December 2011.
These issues included:
- the suspicious nature of the disposal of a wholly-owned subsidiary of Mayer, for HK$15.5 million;
- Mayer did not control projects in Vietnam, which it bought for HK$620 million, and their valuations appeared to have been inflated; and
- two subsidiaries of Mayer’s jointly controlled entity had made substantial prepayments of US$10 million and US$4 million respectively without security to suppliers which appeared to be irrecoverable (collectively, outstanding audit issues).
In August 2012, the auditors indicated to Mayer that they would qualify their audit opinion for the financial statements if the outstanding audit issues were not resolved (potential qualified audit report).
Mayer received a resignation letter from the auditors on 27 December 2012, but it only disclosed the auditors’ resignation together with brief details of the outstanding audit issues on 23 January 2013.
The MMT found that the auditors’ resignation, the outstanding audit issues together with the potential qualified audit report and the US$10 million prepayment to the supplier were specific information regarding Mayer, and price sensitive, in that investors would have viewed it negatively and it would have affected Mayer’s share price, and it was not generally known to the public at the time.
The MMT will hold a hearing on 15 March 2017 on the orders to be imposed on Mayer and its current and former senior executives.
Notes:
- The MMT found that Mayer breached the disclosure requirement pursuant to section 307B(1) of the SFO. The MMT also found that the current and former senior executives had not taken all reasonable measures to ensure that proper safeguards exist to prevent the breach of the disclosure requirements under section 307G(2) of the SFO.
- Listed corporations must by law disclose inside information that has come to their knowledge as soon as reasonably practicable. Timely disclosure of inside information is central to the orderly operation of the market and underpins the maintenance of a fair and informed market.
- For more details, please see the SFC’s press release dated 11 March 2016.
- The MMT’s report is available on its website (www.mmt.gov.hk).
