3 April, 2017
The Market Misconduct Tribunal (“MMT”) sanctioned Mr Augustine Cheong, a former senior employee of an affiliate of Titan Petrochemicals Group Limited (“Titan”), and Ms Gan Ser Soon, his mother, for engaging in insider dealing in the shares of Titan in January 2012.
In late 2010, Titan agreed to dispose of a 95% equity interest in an indirectly wholly-owned subsidiary and issue 500 million new shares to Grand China Logistics Holding (Group) Company Limited (“Grand China”). The consideration was to be paid in six instalments by Grand China. These payments were to be used by Titan to repay outstanding loans and senior notes.
Grand China paid the first two instalments but not the subsequent instalments. During the second half of 2011, Titan started negotiations with potential investors/financiers to secure new investment. However, negotiations came to a standstill by the end of 2011. Furthermore, Titan only received RMB740 million out of the RMB1,712.05 million it was entitled to receive from Grand China by 31 December 2011. Without the payments from Grand China or new investors/financiers, Titan would likely default on its outstanding loans and senior notes.
The MMT found that:
- The information relating to the financial position of Titan and in particular, the likely default by Titan of the outstanding loans and senior notes was relevant information that was not generally known to the public and was price sensitive.
- As a senior executive in the Titan group, Mr Cheong was closely involved in or had knowledge of the relevant information.
- Mr Cheong disposed of 52.5 million Titan shares between 3 to 5 January 2012.
- Ms Gan has knowledge of the relevant information which she received from Mr Cheong. Ms Gan disposed of 1.5 million Titan shares on 3 January 2012.
- Mr Cheong and Ms Gan engaged in insider dealing within the meaning of s.270(1) of the Securities and Futures Ordinance.
The MMT ordered Mr Cheong and Ms Gan, among other things, to pay the notional loss avoided totalling HK$ 2.4 million, and not to deal in SFC regulated financial products for two years. The MMT ruling was given on the basis of an agreed statement of facts.
For further information, please contact:
Melvin Sng , Partner, Linklaters
melvin.sng@linklaters.com
