HK SFC Enforcement Action - CFOs of listed companies beware 香港证监执法行动 - 上市公司首席财务官要小心

(SFC v Chen Ruomao and ors. [2024] HKCFI 928)

A. Facts

The Securities and Futures Commission (“SFC”) sought a disqualification order and a compensation order under ss.214(2)(d) and (e) respectively of the Securities and Futures Ordinance (Cap.571) (“SFO”) against Chen Ruomao (“Chen”), the CFO cum director, of Changgang Dunxin Enterprise Company Limited (2229.hk) (長港敦信實業有限公司) (“Dunxin”).

In 2015 and 2016, Dunxin issued a Share Placement and Bond Placement (“Placements”) stating, respectively, that net proceeds would be “used to enrich the operational requirements and/or for future investments of the Group”, and “applied towards the general working capital of the Group and deployment of solid waste utilization project”. Collectively, Dunxin raised funds in the total sum of HK$173,661,530.98. of which HK$163 million was subsequently withdrawn and deposited into the personal bank account of the Chairman of the Board (the “Chairman”) and used for his personal purposes.

It was the SFCs position that Chen was responsible for causing or allowing the Company to give false or misleading information; procuring or causing the overstatement of cash and bank balance in the Company’s financial statements; and allowing the proceeds of the Placements to be misappropriated by the Chairman, whereby relief under s.214(2) should be granted.

B. Conditions to be satisfied in order to seek relief under s.214 of the SFO

Three conditions must be satisfied in order to seek s.214(2) relief, namely:-

(1) the corporation in question is or was a listed corporation when the conduct complained of occurred;

(2) the business or affairs complained of is that of the company in question; and

(3) the conduct complained of falls within one or more heads of misconduct specified in s.214(1)(a)-(d) of the SFO.

C. Factors considered by the Court

The Court considered that the first and second conditions above had been satisfied in that (1) Dunxin was a listed corporation at the time its funds were misappropriated by the Chairman, and (2) the matters complained of by the SFC were concerned with the propriety of the application of Dunxin’s assets.

As for the third condition, the SFC relied on ss.214(1)(b)-(d) of the SFO, where the business or affairs of the corporation had been conducted in a manner:-

(i) involving defalcation, fraud, misfeasance or other misconduct towards it or its members;

(ii) resulting in its members not having been given all the information with respect to its business or affairs that they might reasonably expect; or

(iii) unfairly prejudicial to its members.

The Judge considered that Chen’s conduct amounted to misconduct under ss.214(1)(b)-(d) taking into account, that:-

(1) Chen was responsible for causing or allowing Dunxin to publish false information in the Announcements having approved the same in board meetings;

(2) Chen was an executive director and CFO of Dunxin, and must have known that there was no project or investment which required the funds raised and could not have honestly believed that the statements concerning the purposes of fund raising in the Announcements were true;

(3) Chen caused or procured Dunxin to publish financial reports which had overstated cash and bank balances by RMB251 million;

(4) Chen produced fictitious bank records and documents, purportedly showing that funds transferred to the Chairman were further transferred to Dunxin’s principal subsidiary.

(5) Chen knew about the misappropriation, but did not take steps to recover the funds and instead concealed the misappropriation from the auditors.

Despite there being no financial benefit to Chen, the Court considered that Chen’s misconduct was very serious. A disqualification order of 10 years and a compensation order of HK$163 million were therefore made against him.

D. Conclusion

S.214(2)(e) of the SFO confers the Court wide discretion to make various orders which it deems just, including orders for compensation.

This case concerns serious misconduct, but compensation orders have been made in respect of misconduct of a less serious nature. As long as the required degree of causal connection is satisfied, the Court can make a compensation order against the wrongdoer.

Leaving aside infidelity and gross misconduct in this case, the takeaway is that CFOs, senior officers and directors of a listed company should always sign or approve documents and transactions for the benefit of the company. Signing blank cheques or any document without verifying the accuracy of the content may result in misappropriation by another officer, for which the approver can be held personally liable to compensate the company.

香港证监执法行动 - 上市公司首席财务官要小心

(证监会诉 Chen Ruomao and ors. [2024] HKCFI 928)

高等法院最近的一项判决确认，即使上市公司董事没有获得任何经济收益，也可能因其他高级职员挪用公司资金而被取消董事资格和/或被勒令向公司作出赔偿。

A. 事实

证券及期货事务监察委员会（“证监会”）分别根据《证券及期货条例》（第 571 章）第 214(2)(d)及(e)条申请取消董事资格令及赔偿令。 证监会根据《证券及期货条例》（第 571 章）第 214(2)(d)及(e)条，向长港敦信实业有限公司（2229.hk）（“敦信”）的财务总监兼董事陈若茂（“陈”）申请取消资格令及赔偿令。

2015年和2016年，敦信分别发行了配股和债券配售（“配售”），分别表示所得款项净额将 “用于充实集团的营运需求及/或未来投资”，以及 “用于集团的一般营运资金及部署固废利用项目”。 敦信集资总额为 173,661,530.98 港元，其中 1.63 亿港元随后被提取并存入董事局主席（“主席”）的个人银行账户，供其个人使用。

证监会的立场是，陈应就导致或容许公司提供虚假或具误导性的资料、促使或导致公司的财务报表多报现金及银行结余，以及容许配售所得款项被主席挪用负责，因此应根据第214(2) 条给予济助。

B. 根据《证券和期货条例》第 214 条寻求救济须满足的条件

寻求《证券及期货条例》第 214(2) 条的宽免必须符合三项条件，即

（1） 当被投诉的行为发生时，有关法团是上市法团;
（2） 所投诉的业务或事务属有关公司的业务或事务;及
（3） 被投诉的行为属于《证券及期货条例》第 214(1)(a)至(d)条所指明的一项或多于一项失当行为。

C. 法院考虑的因素

法庭认为上述第一及第二项条件已获符合，因为 (1) 敦信在其资金被主席挪用时是上市法团，及 (2) 证监会投诉的事项涉及敦信资产的运用是否恰当。

至于第三项条件，证监会以《证券及期货条例》第214(1)(b) 至 (d) 条为依据，即该法团的业务或事务曾以下列方式进行：

（i） 涉及亏空、欺诈、不当行为或对法团或其成员的其他不当行为;

（ii） 导致该法团的成员未获提供他们可合理预期的有关该法团的业务或事务的所有资料;或

（iii） 对其成员造成不公平的损害。
法官认为陈的行为构成第214(1)(b)至(d)条所指的不当行为，并考虑到：

（1） 陈在董事局会议上批准敦信在公告内刊登虚假资料，并对导致或容许敦信在公告内刊登虚假资料负责;

（2） 陈是敦信的执行董事兼财务总监，他肯定知道没有任何项目或投资需要集资，因此不可能诚实地相信公告中有关集资目的的陈述是真实的;

（3） 陈促成或促使敦信发表虚报现金及银行结余人民币 2.51 亿元的财务报告;

（4） 陈制作虚假的银行记录和文件，声称显示转给主席的资金被进一步转给敦信的主要附属公司。

（5） 陈明知资金被挪用，但没有采取措施追回资金，反而向审计员隐瞒挪用情况。

尽管陈没有获得经济利益，但法院认为陈的不当行为非常严重。 因此，法院向他颁布取消资格令 10 年和赔偿令 1.63 亿港元。

D. 结论

《证券及期货条例》第 214(2)(e)条赋予法庭广泛的酌情權 ，可作出其認為公正的各種 命令，包括賠償令。

本案涉及严重的失当行为，但法庭亦曾就性质较轻的失当行为作出赔偿令。 只要符合所需的因果关系程度，法院就可以对不法行为人发出赔偿令。

撇开本案中的不忠和严重不当行为，我们可以得到的启示是，上市公司的首席财务官、高级管理人员和董事应始终为公司利益签署或批准文件和交易。 在未核实内容准确性的情况下签署空白支票或任何文件，可能会导致其他高级职员挪用公款，为此，批准人可能要承担赔偿公司的责任。