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The Insider Dealing Tribunal (IDT) has submitted to the Financial Secretary a report on its inquiry in relation to the listed securities of Siu Fung Ceramics Holdings Limited (Siu Fung).
According to the report, the tribunal concluded its findings by unanimous decision that Mr Siegfried Lee Siu Fung, Mr Daniel Chan Kwong Tat, Mrs Lisa Lam Lai San, Mr William Lam Chun Ming and Mr Henry Tai Hon Leung, all as persons connected with Siu Fung and in knowing possession of relevant information in relation to Siu Fung, were found to have engaged in insider dealing. However, the tribunal found it inappropriate and unjustified to make a finding of insider dealing against nine other named persons.
The tribunal has set down May 24-28, 2004, to hear representations to determine the amount of profit gained or loss avoided as a result of the insider dealing and thereafter decide upon the consequent orders and penalties.
The Siu Fung inquiry is a complicated case which involves 14 implicated parties and 53 witnesses, with a total of 116 actual hearing days.
The summary of the tribunal's report is at the Annex.
Ends/Friday, April 2, 2004
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Annex
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Following is a summary of the Tribunal's report -
Introduction
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By notice dated 10 February 2001, the Financial Secretary required the IDT to institute an inquiry in relation to the listed securities of Siu Fung to inquire into and determine -
(a) whether there has been insider dealing in relation to the company arising out of the dealings in the listed securities of the company by and/or on behalf of -
Mr Lee Siu Fung during June, 1996;
Mr Lee Siu Fung and Lelalertsuphakun Dusanee during July, 1996;
Mr William Lam Chun Ming and Mrs Lisa Lam Lai San during July, 1996;
Mr Robert Warren Miller, Mr Nicholas Anthony Prior, Mr William Lam Chun Ming, Mr Henry
Tai Hon Leung during August and September, 1996; and
Mr Fabrice Christian Jacob, Mr Christian Haas and Mr Philippe Dharmelincourt during September, 1996;
(b) in the event of there having been insider dealing as described in paragraph (a) above, the identity of each and every insider dealer; and
(c) the amount of any profit gained or loss avoided as a result of such insider dealing.
The tribunal under the chairmanship of the Hon Mr Justice Lugar-Mawson, identified four other implicated parties in addition to the implicated parties stated above and completed its inquiry in respect of liability, that is to identify those persons who did or did not commit acts of insider dealing, and submitted a report in that regard to the Financial Secretary on 18 March 2004.
The Company
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Siu Fung was founded in 1983 and listed on the Stock Exchange of Hong Kong in 1993. In March, 1996, it started to expand its business through the acquisition of three German ceramics manufacturing companies, which were then consolidated as one entity, namely NHD International Ltd. (NHD). It also set up in December, 1994, a wholly-owned subsidiary company, Siu Fung Concept Co. Limited (Concept), an investment company for all joint ventures business in the Mainland. The shares of Concept were held by Siu Fung (65%), and some institutional investors (35%) including the Search Group owned by Duty Free's Robert Miller family. The business expansion of Siu Fung had gradually brought financial problem to the company itself and eventually led to the demise of the Siu Fung Group.
In April, 1996, Siu Fung announced its profits, which were weaker than expected. At the same time, it announced a plan for spin-off listing of NHD on the New York Stock Exchange, indicating the funding needs of the group. The market first reacted positively to the proposed spin-off with an increase in the share price of the company, but then speculations/news circulated that the listing plan would be dropped. On September 27, 1996, the company made a formal announcement that the plan had been called off. On the same day, Siu Fung announced its interim results for the period ending 30 June, 1996, which reported a heavy loss of HK$252.29 million. In addition, the company announced that it planned to offer 2 for 5 right issues at HK$0.70 each, indicating that the Siu Fung Group was badly in need of cash.
Alleged insider dealings
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It was alleged that before the financial position and cancellation of the spin-off listing plan was made known to the public, various parties had taken advantage of the relevant information they possessed to sell shares, or were tipped to sell shares, thus constituting insider dealing.
Findings
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The tribunal concluded its findings by unanimous decision as follows -
(1) Mr Siegfried Lee Siu Fung (Siegfried Lee)
Siegfried Lee, the then Chairman and Managing Director of Siu Fung, who is in knowing possession of relevant information in relation to Siu Fung, engaged in insider dealing in two instances -
Firstly, when Siegfried Lee effected, either directly or indirectly, through Mr Daniel Chan Kwong Tat (Daniel Chan), the then Chief Executive Officer (CEO) of Siu Fung, the sale of the -
* 1.4 million Siu Fung shares in which he had the beneficial interest held in Ms Li Man Yi's name with Tanrich Securities Company Ltd. (Tanrich) on 14 June 1996;
* 6.36 million and 2.66 million Siu Fung shares in which he had the beneficial interest held in Mr Wong Fong Kim's name with J.A. Fu & Co. on 14 and 18 June 1996; and
* 6.52 million Siu Fung shares in which he had the beneficial interest held in Mr Wai Man Keung's name with J.A. Fu & Co. on 18 June 1996.
Secondly, when Siegfried Lee counselled or procured his wife Lelalertsuphakun Dusanee to sell the 80 million Siu Fung shares registered in her name on 2 and 8 July 1996, knowing or having reasonable grounds to believe that she would sell them.
Siegfried Lee did not raise a defence under section 10(3) (note 1) or 10(4) (note 2) of the Securities (Insider Dealing) Ordinance (SIDO).
(2) Daniel Chan
Daniel Chan, the then CEO of Siu Fung, who is in knowing possession of relevant information in relation to Siu Fung, engaged in insider dealing when he, as party to a joint enterprise with Siegfried Lee, dealt in Siu Fung shares -
* by counselling or procuring Ms Li Man Yi to sell the 1.4 million Siu Fung shares in which Siegfried Lee had the beneficial interest held in her name with Tanrich on 14 June 1996, knowing or having reasonable cause to believe that she would sell them;
* by selling 6.36 million Siu Fung shares in which Siegfried Lee had the beneficial interest held in Mr Wong Fong Kim's name with J.A. Fu & Co. on 14 June 1996; and
* by selling 6.52 million Siu Fung shares in which Siegfried Lee had the beneficial interest held in Mr Wai Man Keung's name with J.A. Fu & Co. on 18 June 1996.
Daniel Chan has failed to establish a defence under section 10(4) of the SIDO.
(3) Mrs Lisa Lam Lai San (Lisa Lam)
Lisa Lam, the then Deputy CEO of Concept, who is in knowing possession of relevant information in relation to Siu Fung, engaged in insider dealing when her husband, William Lam Chun Ming (William Lam), and she dealt in Siu Fung shares by selling the 6 million Siu Fung shares held in her name in three tranches on 2, 26 and 29 July 1996.
Lisa Lam has failed to establish a defence under section 10(3) of the SIDO.
(4) William Lam
William Lam, the husband of Lisa Lam, who is in knowing possession of relevant information in relation to Siu Fung, engaged in insider dealing when -
* Lisa Lam and William Lam dealt in Siu Fung shares by selling the 6 million Siu Fung shares held in Lisa Lam's name in three tranches on 2, 26 and 29 July 1996.
* Mr Henry Tai Hon Leung (Henry Tai), a director of Concept as well as vice-president of the Investment Divison of Search Group, and William Lam dealt in Siu Fung shares by counselling or procuring their superiors, Robert Warren Miller and Nicholas Anthony Prior of the Chairman's office of Search Group, to sell Search Group's portfolio of Siu Fung shares held by its subsidiary, Mordale Profit Ltd. in the period 2 August to 5 September 1996, knowing or having reasonable cause to believe that they would sell them.
William Lam has failed to establish a defence under section 10(3) of the SIDO in respect of the first transaction.
(5) Henry Tai
Henry Tai, a director of Concept as well as vice-president of the Investment Division of Search Group, who is in knowing possession of relevant information in relation to Siu Fung, engaged in insider dealing when William Lam and Henry Tai dealt in Siu Fung shares by counselling or procuring their superiors, Robert Warren Miller and Nicholas Anthony Prior, to sell Search's portfolio of Siu Fung shares held by its subsidiary, Mordale Profits Ltd. in the period 2 August to 5 September 1996, knowing or having reasonable cause to believe that they would sell them.
(6) Ms Li Man Yi, Mr Wong Fong Kim, Mr Wai Man Keung, Mrs Lelalertsuphakun Dusanee, Mr Nicholas Anthony Prior, Mr Robert Warren Miller, Mr Fabrice Christian Jacob, Mr Christian Haas and Mr Phillipe Dharmelincourt
The tribunal concluded that it would be inappropriate and unjustified to make a finding of insider dealing against the nine above named persons.
The tribunal has set down 24-28 May 2004 to hear representations to determine the amount of profit gained or loss avoided as a result of the insider dealing and thereafter decide upon the consequent orders and penalties.
Note 1: Under section 10(3) of the SIDO, a person who enters into a transaction which is an insider dealing shall not be held to be an insider dealer if he establishes that he entered into the transaction otherwise than with a view to the making of a profit or the avoiding of a loss (whether for himself or another) by the use of relevant information.
Note 2: Under section 10(4) of the SIDO, a person who, as agent for another, enters into a transaction which is an insider dealing shall not be held to be an insider dealer if he establishes that he entered into the transaction as agent for another person and he did not select or advise on the selection of the securities to which the transaction relates.
