Appeals Tribunal upholds SFC’s sentence on Yi Shun Da Capital
The appeals court upheld the SFC’s decision to punish Yi Shun Da Capital for the sponsorship misconduct, but reduced the amount of the penalty.
Hong Kong’s Securities and Futures Appeals Tribunal (SFAT) upheld the Securities and Futures Commission (SFC) decision to reprimand and fine Yi Shun Da Capital (YSD Capital) for sponsorship failure.
The SFC reprimanded YSD Capital and fined it HKD 3 million for failing to fulfill its sponsorship obligations in Imperial Sierra Group Holdings Limited’s application for registration in 2017.
The disciplinary action follows a review of the SFC’s decision to punish Yi Shun Da Capital by SFAT.
SFAT upheld the SFC’s decision but raised the fine from HKD 4.5 million to HKD 3 million, taking into account Yi Shun Da Capital’s “financial difficulties”.
The SFC found that Yi Shun Da Capital did not perform any “due diligence” on Imperial Sierra before submitting the registration application and ensuring that all the important information obtained was included in the proof of the application and that the information was accurate and substantially complete.
Imperial Sierra reportedly received payments from customers through third parties during the historical three-year period from January 2014 to December 2016, although they represented a large portion of the company’s revenue.
The SFC found that Yi Shun Da Capital had failed to verify customer relationships with 23 third-party payers and the reasons for third-party payments, and failed to follow up on third-party payers who had shown in interviews that they Apparently they did not know the reasons themselves.
Imperial Sierra recorded amounts owed by a shareholder in millions of dollars during the reporting period, consisting of withdrawals made by the president of the company and the majority shareholder to facilitate loan and investment agreements with his knowledge.
The SFC found that Yi Shun Da Capital did not obtain and review the agreements and bank transaction records regarding the financing agreements before submitting the application for registration, and did not follow up, although some of the acquaintances were not able to explain the reasons or purposes of the financial arrangements during the interviews.
The SFC also uncovered various suspicious transactions that should have called into question whether Imperial Sierra and / or its president provided financial support for customer payments, such as personal loans given to customers after payment. Yi Shun Da Capital did not perform any due diligence or minimal verification on these suspicious transactions.
Yi Shun Da Capital also failed to ensure disclosure of all material information in Imperial Sierra’s proof of application prospectus, the SFC said.
The SFC originally proposed to impose a fine of HKD 14 million on Yi Shun Da Capital. After examining its financial situation, the SFC decided to impose a fine of HKD 4.5 million on the company.
The full SFAT determination is posted here.
In September, the SFC banned former Yi Shun Da Capital CEO Fabian Shin Yick from re-entering the industry for 20 months after violating the code of conduct and sponsorship guidelines in his work on the listing request. of Imperial Sierra Group in 2017.