The Securities and Futures Commission (SFC) has publicly criticised CICC Financial Trading Limited (CICCFT) and China International Capital Corporation Limited (CICCL) for breaches of the Code on Takeovers and Mergers (Takeovers Code).
In transactions related to mandatory general offers for the H shares of Dalian Port (PDA) Company Limited and Maanshan Iron & Steel Company Limited in 2019, China International Capital Corporation Hong Kong Securities Limited (CICCHKSL) (Note 1), a member of the China International Capital Corporation group (CICC Group), was the financial adviser to the offerors (Note 2).
CICCFT and CICCL dealt in the relevant securities of Dalian Port and Maanshan Iron during the transactions but failed to make timely disclosure of their dealings in relevant securities under Rule 22 of the Takeovers Code (Note 3).
CICCFT and CICCL accepted that they failed to comply with the Takeovers Code and agreed to the disciplinary action taken against them. In deciding the sanction, the SFC paid considerable regard to the prompt actions taken by CICC Group following the discovery of the breach. The SFC also considered CICC Group’s full cooperation and a number of measures which it has put in place to ensure future compliance.
The disclosure obligations in the Takeovers Code are intentionally onerous to reflect the fact that a high degree of transparency is essential to the efficient functioning of the market in the critical period of an offer or possible offer for a company’s shares. Timely and accurate disclosure of information in relation to relevant dealings, including those of advisers, plays a fundamental role in ensuring that takeovers are conducted within an orderly framework and the integrity of the markets is maintained.
A copy of the Executive Statement can be found in the “Takeovers and mergers – Decisions & statements – Executive decisions and statements” section of the SFC website.
- CICCHKSL is licensed to carry out Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance.
- CICCHKSL and CICCFT are wholly-owned subsidiaries of CICCL and all of them are members of CICC Group. CICCFT and CICCL are also recognised as exempt principal traders under the Takeovers Code. CICCFT and CICCL therefore fell within the definition of “associate” of the offerors in both of the offers.
- Rule 22.1(a) of the Takeovers Code provides that “[d]ealings in relevant securities by an offeror or the offeree company, and by any associates of either of them, for their own account during an offer period must be publicly disclosed…”.
Note 5 to Rule 22 further provides that “[d]isclosure must be made no later than 12.00 noon on the business day following the date of the transaction…”.