香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CENSURES:
(1) Hygieia Group Limited (Stock Code: 1650);
CENSURES:
(2) Mr Hong Rui Sheng, former executive director and CEO;
CRITICISES:
(3) Mr Toh Eng Kui, executive director, Chairman and CEO;
(4) Mr Peh Poon Chew, executive director;
AND FURTHER DIRECTS:
Mr Hong, Mr Toh and Mr Peh to attend training.
The Company used a substantial amount of funds at or very shortly after listing, including entry into a discretionary investment management agreement and a number of agreements for public relations and advisory services. No reference had been made in the Company’s prospectus to the entry into these agreements.
Several issues of concern later emerged in respect of these agreements. Under the investment management agreement, the investment manager had been paid a substantial up-front fee, and was left with complete discretion as to the investments. The investment manager placed almost the entire investment amount into the shares of one private company engaging in the trade of antique jewellery, and a promissory note issued by the same private company. The Company made no enquiries about, and had no supervision over, the investments.
In respect of the service agreements, the Company had not conducted adequate due diligence on the service providers, and had not obtained fee quotations from other providers, in breach of the Company’s own internal controls. The fees paid by the Company to the service providers were found to be excessive, and the commercial rationale for some of the engagements was questionable.
The Company and the directors admitted their respective breaches and reached a settlement with the Listing Division in respect of the Listing Rule breaches in this case.
Key messages:
Investments contemplated by an issuer during the listing process, to be made with IPO proceeds or otherwise, should be disclosed in the issuer’s prospectus.
There must be a proper commercial rationale for the entry into service agreements. Issuers should seek to ensure that service fees are reasonable, and that adequate due diligence is conducted on the service provider.
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A copy of the Statement of Disciplinary Action is available on the HKEX website.
Ends