SFC Sanctions Mr Chan Kin Sun, Ms Cheng Kwan Ying Jennifer, Ms Za Ah Fong, Ms Chan Lai Lan, Ms Chan Lai Lai Karen, Ms Cheng Mei Ying Michelle and Mr Yu Wing Keung (collectively referred to as the "Chan Family")

10 Jun 2002



The Securities and Futures Commission announces today that the following disciplinary action has been taken against Mr Chan Kin Sun (Mr Chan) and other members of the Chan Family in relation to a breach of the Hong Kong Code on Takeovers and Mergers (Takeovers Code):

1. The Takeovers and Mergers Executive (Executive) has imposed an order denying Mr Chan direct or indirect access to the securities markets (a Cold Shoulder Order) for a period of 15 months commencing on Tuesday, 11 June 2002.
2. The Executive publicly censures Mr Chan and his family members, namely: Ms Cheng Kwan Ying Jennifer (Mr Chan's wife); Ms Za Ah Fong (Mr Chan's mother); Ms Chan Lai Lan (Mr Chan's sister); Ms Chan Lai Lai Karen (Mr Chan's sister); Ms Cheng Mei Ying Michelle (Mr Chan's sister-in-law) and Mr Yu Wing Keung (Mr Chan's brother-in-law) in relation to their conduct in this matter.
3. On Monday 10 June 2002 Mr Chan surrendered his registrations with the SFC as a securities dealer under the Securities Ordinance and commodities dealer under the Commodities Trading Ordinance for 30 months with immediate effect. Mr Chan has also undertaken not to reapply to the SFC for any registration, licence or approval for 30 months.


Background

Between 1 January 2000 and 20 February 2001 the Chan Family actively traded in shares in Truly International Holdings Limited. By 5 September 2000, the Chan Family had increased its collective holding to 35.67%. No general offer was made.

Mr Chan is registered with the SFC as a securities dealer and a commodity dealer. He acknowledges that he is the principal member and leader of the Chan Family concert group. He actively traded Truly shares during the relevant period placing various purchase orders on his own behalf as well as on behalf of other members of the Chan Family. He provided funding for most of these purchases. Other members of the Chan Family also acquired Truly shares on Mr Chan's recommendation.


The Chan Family is considered to be acting in concert for the purposes of the Takeovers Code. As a result the Chan Family has breached Rule 26.1 of the Takeovers Code in acquiring more than 35% of the shares in Truly without making a general offer. Rule 26.1 of the Takeovers Code in effect at the relevant time provided that when two or more persons are acting in concert and they collectively hold not less than 35% (this threshold was reduced to 30% on 19 October 2001) a mandatory offer obligation is triggered. The Chan Family's failure to make such an offer amounted to a breach of the Code.

The Executive considers that the conduct of Mr Chan and the Chan Family has resulted in a serious and blatant breach of a fundamental provision of the Takeovers Code that merits strong disciplinary action. Mr Chan and the Chan Family accept that they have breached the Code and accordingly that shareholders of Truly who should have received a general offer should either receive an equivalent offer or be compensated. However, neither Mr Chan nor any other member of the Chan Family has sufficient resources, and it is unlikely that they would be able to secure sufficient financing for any such offer or compensation payment in the foreseeable future. In the circumstances, Mr Chan and the Chan Family have agreed to disciplinary action being taken against them.

The Executive wishes to take this opportunity to remind practitioners and parties who wish to take advantage of the securities markets in Hong Kong that they should conduct themselves in matters relating to takeovers and mergers in accordance with the Code. If they do not, they may find that they are subject to sanction.

In addition, the SFC has concluded that Mr Chan's conduct in this matter has a significant impact on his fitness and properness to remain registered. The SFC has decided that Mr Chan's conduct merits a suspension of Mr Chan's registrations with the SFC for 30 months. In forming this view the SFC has taken into account Mr Chan's primary role in the breach and that he was a principal member and the leader of the concert group. Mr Chan's conduct clearly fell far short of that expected of an experienced registrant and licensee. The SFC has also taken into account the fact that this is not the first time that Mr Chan's fitness and properness to remain registered have been called into question. On 1 November 1997 Mr Chan's registrations with the SFC were suspended for 30 months. One of the factors taken into account by the SFC at the time was that Mr Chan had failed to ensure effective controls and procedures were in place resulting in trading malpractices. The SFC considers Mr Chan's previous suspensions to be an aggravating feature.

An SFC spokesman said: "Any registrant who fails to abide by the codes or guidelines issued by the SFC or other applicable laws would cast serious doubts on whether he is fit and proper to remain registered. The SFC considers such matters important in maintaining a fair and orderly market and in protecting investors' interests, and will not hesitate to take disciplinary actions against the registrant accordingly."




Page last updated : 1 Aug 2012