Insider Dealing Tribunal submits reports

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Insider Dealing Tribunal has submitted reports on its inquiries relating to Emperor (China Concept) Investments Limited and Ngai Hing Hong Company Limited respectively to the Financial Secretary.

In both cases, one of the implicated parties admitted insider dealing. The Tribunal ordered them to forfeit the profit gained by the insider dealing and pay penalty to the Government. Both of them were also suspended from being a director of listed company for a period of one to two years.

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Note:

A brief summary of the Tribunal's reports (English only) is attached - Annex I on Emperor (China Concept) Investments Limited; and Annex II on Ngai Hing Hong Company Limited.

Annex I

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Insider Dealing Tribunal Inquiries into the

Emperor (China Concept) Investments Limited

INTRODUCTION

By a notice dated 26 September 1997, the Financial Secretary required a division of the Insider Dealing Tribunal to inquire into and determine in relation to the listed securities of Emperor (China Concept) Investments Limited ("Emperor China") -

(a) whether there has been insider dealing in relation to the listed securities of Emperor arising out of the dealings in those securities by or on behalf of Mr Albert YEUNG Sau Shing, Miss Kelly YEUNG Po Kam, Miss Rebecca YEUNG Bo Chow, Kingsday Limited and Asian Star Holdings Limited during the period from 7 October 1993 to 11 October 1993 (inclusive);

(b) in the event of there having been insider dealing as described in sub-paragraph (a) above, the identity of each and every insider dealer; and

2. The Tribunal has completed its inquiry and the report was, to all intents and purposes, completed in early June 1998. Nonetheless, the Tribunal decided to withhold the submission of the report to the Financial Secretary until the Court of Appeals' decision on an appeal in relation to the Hong Kong Worsted Mills inquiry, which might have implications to the Tribunal's conclusion on the Emperor case, was announced. Subsequent to the announcement of the appeal result on 31 July 1998, the Tribunal formally submitted its full report to the Financial Secretary on 12 August 1998.

THE COMPANY

3. Emperor China was incorporated under the name of Yu Hing Holdings Limited in February 1973 and was listed in March the same year.

4. In August 1991, Emperor International acquired a major interest in Yu Hing and changed the company name to Bo Shing Real Estate Limited. In July 1992, pursuant to a group re-organisation, Bo Shing Real Estate Limited became the subsidiary of Bo Shing Holdings Limited ("Bo Shing"), a company incorporated in Bermuda in May 1992. In December 1992, Bo Shing changed its name to Emperor (China Concept) Investment Limited.

THE ALLEGATIONS

5. The allegations involve possible insider dealing in the shares of Emperor China prior to an announcement dated 11 October 1993 that a consortium comprising substantially a Mainland enterprise and a Hong Kong listed company had indicated an interest in acquiring the controlling interest in Emperor China held by Emperor International. During the investigation conducted by the Securities and Futures Commission (SFC), certain dealings in Emperor China's shares in the names of several companies were examined, among them were Kingsday Limited ("Kingsday") and Asian Star Holdings Limited ("Asian Star"), of which Ms. Kelly YEUNG Po Kam and Ms. Rebecca YEUNG Bo Chow were director respectively. Further investigation suggested that both Kingsday and Asian Star were connected to Mr Albert YEUNG.

6. At the conclusion of the investigation, it was alleged that during the period from 7 October 1993 to 11 October 1993 -

(a) Albert YEUNG, his sister Ms Kelly YEUNG Po Kam and Kingsday were insider dealers, as defined in the Securities (Insider Dealing) Ordinance, in the purchase of 4,356,000 Emperor China shares in the name of Kingsday at an average price of $4.96 on 8 October 1993 and 11 October 1993. The "paper" profit made from these purchases upon the public announcement of the relevant information is estimated to be about $6,926,000; and

(b) Mr. Albert YEUNG, his other sister Ms Rebecca YEUNG Bo Chow and Asian Star were insider dealers in the purchase of 664,000 Emperor China shares in the name of Asian Star at an average price of $4.72 from 7 October 1993 to 11 October 1993. The "paper" profit made from these purchases is estimated to be about $1,215,000.

THE INQUIRY AND FINDINGS

7. The Tribunal commenced its inquiry on the Emperor China case on 18 December 1997. When the substantive hearing of the inquiry resumed in April 1998, Mr. Albert YEUNG admitted to the Tribunal that he had committed insider trading in relation to the listed securities of Emperor in the period concerned. Two other implicated parties, namely Ms. Rebecca YEUNG and Kelly YEUNG also filed statutory declarations to declare their lack of involvement in the insider trading under inquiry.

8. Having considered the inactive role the YEUNG's sisters had been playing in the two companies as set out in their statutory declarations Mr Albert YEUNG admission and other evidence and submissions by the parties and Counsel to the Tribunal, the Tribunal made its conclusion in May 1998 and identified Mr. Albert YEUNG, Kingsday Limited and Asian Star Holdings Limited as insider dealers. The Tribunal also decided that it would not identify Ms. Rebecca YEUNG and Ms. Kelly YEUNG as insider dealers. The Tribunal also made no orders against the Kingsday Limited and Asian Star Holdings Limited because the former ceased to be a corporate entity and the latter is dormant.

THE ORDERS

9. Based on its findings, the Tribunal made the order pursuant to section 23(1)(a) of the Securities (Insider Dealing) Ordinance (Cap. 395) that Mr. Albert YEUNG shall not, without leave of the Court of First Instance of the High Court, be a director or a liquidator or a receiver or a manager of the property of a listed company for a period of two years. He is also ordered to pay to the Government the sum of $6,811,400 being the amount of profit gained under section 23(1)(b) and a penalty of $10,000,000 under section 23(1)(c) of the same Ordinance as a result of the insider dealing as determined by the Tribunal. Mr. Albert YEUNG has also been ordered to pay for the expenses of the inquiry, which amounted to $3,882,033.

Annex II

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Insider Dealing Tribunal Inquiries into the

Ngai Hing Hong Company Limited

INTRODUCTION

By a notice dated 6 May 1998, the Acting Financial Secretary required a division of the Insider Dealing Tribunal to inquire into and determine in relation to the listed securities of Ngai Hing Hong Company Limited ("NHH") -

(a) whether there has been insider dealing in relation to NHH arising out of the dealings in the listed securities of the company by or on behalf of Messrs Taylor HO Tai Loi, HUI Sai Chung and HUI Kwok Kwong on 21 July 1995;

(b) in the event of there having been insider dealing as described in sub-paragraph (a) above, the identity of each and every insider dealer; and

2. The Tribunal has completed its inquiry and the final report was submitted to the Financial Secretary on 12 August 1998.

THE COMPANY

3. NHH was listed on the Stock Exchange of Hong Kong since 25 April 1994. Its principal business included manufacture and sale of plastic colorants and trading of plastic raw materials.

THE ALLEGATIONS

4. The case involves alleged insider dealing in the shares of NHH by Mr. Taylor HO Tai-loi, Financial Controller and Company Secretary of NHH, in his purchase of 1 million NHH shares on 21 July 1995. It was alleged that there is also circumstantial evidence to suggest that Taylor Ho's insider dealing was counselled or procured by Messrs. HUI Sai-chung and HUI Kwok-kwong ("the HUIs"), the Chairman and Vice Chairman of NHH respectively.

5. Briefly, investigation by the Securities and Futures Commission (SFC) alleged that Mr. Taylor Ho bought 1 million NHH shares on 21 July 1995 whilst in possession of relevant information which included consolidated profit figure for July 1994 to April 1995, un-consolidated profit figures from July 1994 to June 1995 and full year's sales, cost of sales and administration cost figures which was not generally known to the public. As the Financial Controller and Company Secretary of NHH, this information enabled him to make a reasonable estimate of the substantial increase in the company's profit for the 1994/95 fiscal year, which eventually turned out to be $60.9 million, or a 74% increase over the last year. On 19 September 1995, the day after the increase in profits was announced, Mr. Taylor Ho disposed of 2 million NHH shares and realised $8.2 million. If half of this realisation was attributed to the suspected insider dealing (as he only acquired 1 million NHH shares on 21 July 1995), his profit as a result of suspected insider dealing would amount to approximately $2 million.

6. SFC also suspected that the HUIs were financing Mr. Taylor Ho's purchase. It was suggested that the money for the purchase of 1 million NHH shares by Mr. Taylor Ho was provided equally by the HUIs via a money changer. The HUIs had altogether lent $6 million to Mr. Taylor Ho while knowing that the latter had used $2 million of this money to buy 1 million shares in NHH. It was believed that the HUIs, being the Chairman and Vice-chairman of NHH, would have known the substantial increase in NHH's profit in advance of public announcement. Furthermore, the method the HUIs chose to lend money to Mr. Taylor Ho (via a money changer) raised suspicion. Therefore, it was suspected that Mr. Taylor Ho's purchase was counselled or procured by the HUIs.

THE INQUIRY AND FINDINGS

7. The Tribunal commenced its inquiry on the NHH case on 22 May 1998. When the substantive hearing of the inquiry resumed in July 1998, Mr. Taylor Ho admitted to the Tribunal that he had committed insider dealing in relation to the listed securities of NHH in the period concerned. Separately, two other implicated parties, namely the HUIs, filed statutory declarations to the Tribunal to declare their lack of involvement in the insider dealing under inquiry.

8. After having considered the evidence and submissions by all implicated parties, the Tribunal finally concluded that Mr. Taylor Ho was the only insider dealer in the case. The Tribunal found Taylor Ho an "honest witness". Based on Taylor Ho's admission and evidence from witnesses including members of NHH's accounting staff, brokers and auditors and upon balancing "effectiveness against costs", the Tribunal concluded that there was no convincing evidence to prove that the HUIs had taken part in any insider dealing.

THE ORDER

9. Pursuant to sections 23(1) and 27 of the Securities (Insider Dealing) Ordinance (Cap. 395) the Tribunal ordered that -

(a) Mr. Taylor Ho shall not, without leave of the Court of First Instance of the High Court, be a director or a liquidator or a receiver or a manager of the property of a listed company for a period of one year with effect from 23 July 1998;

(b) Mr. Taylor Ho shall pay to the Government the sum of $1,945,338 being the amount of profit gained as a result of the insider dealing;

(d) Mr. Taylor Ho shall pay to the Government the sum of $1,084,951 being expenses of the inquiry; and

(e) all sums shall be paid within 6 months from 23 July 1998.

End/Friday, September 25, 1998

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