******************************************************
Following is a question by the Hon Albert Ho and a reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, in the Legislative Council today (November 18):
Question:
On October 20 last year, CITIC Pacific Limited issued a profit warning, which stated that due to its entering into certain leveraged foreign exchange contracts, the company had incurred losses of HK$15,507,700,000 in total, and the Stock Exchange of Hong Kong Limited (SEHK) as well as the Securities and Futures Commission (SFC) respectively confirmed on October 22 last year that they were making inquires and launching an investigation into CITIC Pacific Limited, and the work concerned has to date been going on for a year. Moreover, it was reported that the Commercial Crime Bureau of the Police Force also conducted a search at the headquarters of the company in April this year. In this connection, will the Government inform this Council:
(a) whether it knows the progress of the respective enquiries and investigations made by SEHK, SFC and the Police in respect of the aforesaid incident, whether the work concerned has still not been completed; if it has not been completed, of the reason of the slow progress of the work, the difficulties encountered in the course of investigation, and how much more time is estimated to be needed to complete the work and make public the outcome;
(b) given that there have been reports that the immediate past chairman of the aforesaid company sold and encashed in early May this year some of the company's shares, whether it knows if SFC will consider invoking section 213 of the Securities and Futures Ordinance (SFO) to apply to the court for an order to freeze his assets, so as to ensure that his reduced holding of the relevant assets will not affect the seeking of compensation by people who suffer losses; and
(c) after ascertaining the liability of the people involved in the aforesaid incident, whether it knows if SFC will consider invoking section 214 of SFO to apply to the court for an order to disqualify them from being the directors of the company, as well as invoking the relevant legislation to apply to the court to require them to make compensation to the companies and minority shareholders who suffer losses due to their acts, so as to highlight the importance of full disclosure of information by listed companies to their shareholders and the market?
Reply:
President,
In response to Hon Albert Ho's question, we have consulted the Securities and Futures Commission (SFC), the Stock Exchange of Hong Kong Limited (SEHK) and the Hong Kong Police Force (HKPF) for comments and our reply is as follows:
(a) SFC announced on October 22, 2008 that they had commenced a formal investigation into the affairs of the CITIC Pacific Limited, and since then SEHK had suspended their investigation into the company. The SFC's investigation has been completed while the Police's investigation is still underway. According to SFC, due to the secrecy provisions set out in section 378 of the Securities and Futures Ordinance (SFO), they are unable to provide comment on individual cases. At the same time, HKPF will not comment further on the progress of the case.
(b) & (c) Under section 213 of the SFO, SFC may apply to the court for orders to freeze assets in cases where a person has or may have contravened the SFO and certain parts of the Companies Ordinance in relation to prospectuses and re-purchase of shares. Under section 214 of the SFO, SFC may apply to the court to make orders disqualifying a person from being a company director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for the company's affairs having being conducted in a manner involving defalcation, fraud or other misconduct. The court may also order a company to bring proceedings in its own name against any person specified in the order and may make any other order it considers appropriate. SFC will take all necessary measures to protect the interest of investors and maintain a fair and orderly marketplace for the securities and futures industry in Hong Kong. Depending on the merits of individual cases, SFC will consider and take appropriate actions under the SFO.
Ends/Wednesday, November 18, 2009
Issued at HKT 14:20
NNNN