The Securities and Futures Appeals Tribunal (SFAT) has affirmed the decision of the Securities and Futures Commission (SFC) to ban Mr Lai Voon Wai, a former responsible officer (RO) of CCB International Capital Limited (CCBIC) and BOCOM International (Asia) Limited (BIAL), from re-entering the industry for five years from 29 September 2020 to 28 September 2025 for failing to discharge his supervisory duties as a sponsor principal in charge of supervising the execution of two listing applications (Notes 1 to 3).
The SFC’s decision followed the earlier disciplinary actions against CCBIC and BIAL (Notes 4 & 5).
The SFC found that the failures committed by CCBIC and BIAL, as the sole sponsor in the listing applications of Fujian Dongya Aquatic Products Co., Ltd. (Fujian Dongya) and China Huinong Capital Group Company Limited (China Huinong) respectively, were attributable to the neglect on the part of Lai.
Lai, who was a Managing Director of Corporate Finance and an RO of CCBIC at the material time, failed in his role as the sponsor principal to (i) properly supervise the due diligence process on the third party payment arrangement between Fujian Dongya, its overseas customers and their third party payers; (ii) apply his mind as to the reasonableness of explanations by Fujian Dongya on third party payments despite various red flags raised in the due diligence process; and (iii) supervise the due diligence interviews with Fujian Dongya’s customers.
In the listing application of China Huinong, Lai, who was then a Managing Director and Head of Investment Banking Division and an RO of BIAL, failed in his role as a sponsor principal to (i) take proper steps to ensure that the due diligence work was compliant with the relevant regulatory requirements before signing and submitting the listing application to the Stock Exchange of Hong Kong (SEHK) (A-1 filing) and (ii) give BIAL’s transaction team adequate instructions and supervision to ensure the information provided to the SEHK and the SFC was properly verified when repeated questions were raised between A-1 filing and SEHK’s return of the listing application.
Mr Thomas Atkinson, the SFC’s Executive Director of Enforcement, said: “The disciplinary actions against the sponsors and sponsor principal involved in the listing applications of China Huinong and Fujian Dongya reflect the importance that the SFC attaches to their roles as gatekeepers of the IPO process and market quality. They should also pay heed to the SFAT’s Determination which sends a strong and clear message to the market that sponsor principals should properly supervise and take full responsibility for the work of the transaction team.”
- Lai was licensed under the Securities and Futures Ordinance and approved as an RO of CCBIC in respect of its Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities between 3 October 2006 and 27 June 2014, 11 April 2014 and 27 June 2014 and 20 June 2006 and 27 June 2014 respectively. Lai was also approved to act as an RO of BIAL in respect of its Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities between 20 October 2014 and 13 March 2017. Lai is currently not licensed by the SFC.
- Lai was approved as a sponsor principal of CCBIC and BIAL from 1 January 2007 to 27 June 2014 and from 20 October 2014 to 13 March 2017, respectively. In respect of a listing assignment, a sponsor principal means an individual appointed by a sponsor to supervise the transaction team to execute a listing application. See paragraph 17.15(l) of the Code of Conduct for Persons Licensed by or Registered with the SFC.
- The SFAT’s reasons for determination is available on its website at www.sfat.gov.hk.
- CCBIC was reprimanded and fined $24 million by the SFC. Please refer to the SFC’s press release dated 9 July 2018.
- BIAL was reprimanded and fined $15 million by the SFC. Please refer to the SFC’s press release dated 15 March 2017.