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HK Regulator Fines and Revokes Co's Licence for Poor Conduct

The Hong Kong (HK) Securities and Futures Commission (SFC) has announced that it has fined Mega Capital (Asia) Company Limited (Mega Capital) US$42 million and revoked its licence to advise on corporate finance "for failing to discharge its duties in relation to the listing application on Hontex International Holdings Company Limited (Hontex) in 2009". The SFC investigation revealed a number of problems with Mega Capital's practices, including inadequate due diligence on Hontex and its subsidiaries' customers, suppliers and franchisees, failure to act independently, as "all interviews were arranged by Hontex and conducted in the presence of Hontex's representatives", and inadequate audit trail of due diligence work such as a lack of records. Furthermore, the SFC stated that "[m]ost of the due diligence work was handled by junior and inexperienced staff of Mega Capital without adequate supervision". Mega Capital also made an untrue declaration to The Stock Exchange of Hong Kong Limited (SEHK) "confirming that Mega Capital would/had made reasonable due diligence inquiries and believed that all information provided to the SEHK during the listing application process of Hontex, including the information contained in the [initial public offering] Prospectus, was true in all material respects and did not omit material information".

SFC's media release (22 April 2012)
(Source: SFC)

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