ComplianceOne Newsletter – September 2025

The topics discussed in this monthly newsletter are as follows:

REGULATORY UPDATES

1. NASDAQ is pioneering in launching tokenization of stocks

2. SFC consults on extending investor identification regime to exchange-traded derivatives in Hong Kong

   
   

MARKET NEWS

3. Hong Kong’s securities industry saw continued earnings growth and record transactions in first half of 2025

4. Only a limited number of licenses will be granted by the HKMA amid 77 applications received for Stablecoin Issuers

5. SFC and Dubai Financial Services Authority bolster ties in supervising cross-border investment management

6. SFC and HKMA unveil roadmap to advance Hong Kong’s vision to be global fixed income and currency hub

   
   

ENFORCEMENT NEWS

7. SFC Bans Former UBS Advisor Suen Kin-wing for Life Over Money Laundering and Contempt Convictions

8. SFC Bans Former Citigroup Executive Richard Charles Heyes for 5 Years Over Serious Misconducts

9. SFC Reprimands and Fines Instinet Pacific Limited $8 Million for Cross Trade Reporting Failures

10. SFC Upholds Fine on RaffAello Capital for Sponsor Failures in Paprika Listing

11. SFC Reprimands and Fines Roofer Securities $2.1 Million for Client Money Mishandling

12. SFC Secures Disqualification Orders Against Five More Former Directors of Superb Summit Due to misappropriate assets

13. SFC Suspends Former Agg. Asset Management RO Chow Tsz Lam for 12 Months Over Fund Mismanagement

14. SFC Pursues Disqualification Orders Against Former Directors of Century Energy International Holdings Limited

    
    

Regulatory Updates

1. NASDAQ is pioneering in launching tokenization of stocks

In less than two years, the tokenized securities market experienced almost “explosive” growth with on-chain stocks surging from less than 5 million dollars starting from 2024 to 0.42 billion, a more than 80 times increase in two years.

The driving wave is originated from the collective entry and accelerated layout of enterprises; both crypto-native companies and traditional financial giants are striving to tap the advantage of being the first-mover in the emerging circuit of tokenized stocks.

These moves not only set off a race between crypto and traditional finance, but also a potential “revolution” against the traditional exchange model. Nasdaq, being the world’s second-largest exchange, took the initiative to incorporate tokenized stocks attempting to push itself to be the pioneer in the Wall Street.

Some key takeaways we need to know about the moves by NASDAQ:

1. Tokenized stocks are not new stuff, they are new “packaging” for the traditional equity, namely, to connect blockchain’s bookkeeping and settlement capabilities on top of existing financial infrastructure.

2. The appeal of tokenization is that it touched several “core pain points” in the capital market and provide quick solution with: (i) settlement efficiency, (ii) transaction time and accessibility, (iii) programmability of assets.

3. With the completion of the Depository Trust Company (“DTC”) upgrade, and the on-chain settlement function early in Q3 next year, there will already be parallel run of cryptocurrency stocks and traditional stocks this year.

SIGNIFICANCE:

NASDAQ has officially submitted an application for tokenized Stocks trading with the SEC, a “core attempt” by Wall Street in the digitalization process. The core of this proposal is that tokenized stocks should enjoy exactly the same rights and protections as their underlying securities, transaction matching is still carried out in the existing order book, and DTC is responsible for minting equivalent tokens on the chain.

As the CEO of NASDAQ has said, “Blockchain technology offers unprecedented possibilities for shortening settlement cycles, modernizing proxy voting, and automating corporate actions.” To put in simple words, NASDAQ is not trying to do away with the old order, but rather to upgrade the underlying structure of the market with minimal impact and to ensure that the core principles of investor protection and market transparency remain intact.

2. SFC consults on extending investor identification regime to exchange-traded derivatives in Hong Kong

The SFC launched a consultation on 22 September 2025 on the proposed investor identification regime for the exchange-traded derivatives market (“HKIDR-DM”) which is expected to further consolidate and reinforce the integrity and sustainable development of Hong Kong’s exchange-traded derivatives markets, while a tentative schedule for implementation is in the first quarter of 2028.

The proposed HKIDR-DM was established and based on the successful implementation of the similar regime for the securities markets, i.e. the HKIDR-S (the Hong Kong investor identification regime for securities markets). The scope of the HKIDR-DM comprises of order submissions for futures contracts, options contracts and stock options traded on the trading system of the Hong Kong Futures Exchange Limited (“HKFE”).

Key takeaways are:

1. the regime will apply to Relevant Regulated Intermediaries (“RRIs”), i.e., licensed corporations (“LCs”) under the SFC and registered institutions (“RIs”) under the HKMA that trade (as principal or agent) futures and options contracts;

2. the requirements under the proposed HKIDR-DM are analogous to those currently set out in the HKIDR-S. RRIs will be required to assign a unique “Broker-to-Client Assigned Number” (“BCAN”) to Relevant Clients (it basically refers to the immediate client of a RRI who maintains a trading account with the RRI) placing or intending to place orders in the futures market;

3. RRIs must collect and submit up-to-date client identification data (“CIDs”) alongside the BCAN in a file (“BCAN-CID Mapping File”) to a central data repository maintained by Hong Kong Exchanges and Clearing Limited (HKEX), the same arrangements as the securities side;

SIGNIFICANCE:

As Mr. Rico Leung, the SFC’s Executive Director of Supervision of Markets has said, “to keep up with Hong Kong’s fast-growing derivatives market and align with global best practices, the proposed extension of our investor identification regime represents a major stride in detecting irregularities and protecting investors whilst minimizing operational burden on the industry”; and he further added that, “our enhanced cross-market surveillance capabilities will help reinforce market integrity and investors’ confidence – both essential in solidifying Hong Kong’s sustainable development as an international financial center.”

Market News

3. Hong Kong’s securities industry saw continued earnings growth and record transactions in first half of 2025

The latest financial review of the industry issued by the SFC demonstrates a robust growth in the earnings of the securities sector with key promising figures as below:

1. a steady growth momentum with a 14% profit increase to HKD28.9 billion amid record high securities transaction value in the first six months of 2025;

2. a total value of transactions of all securities dealers and securities margin financiers reached a record HKD99.2 trillion in the first half of 2025, a recorded increase of 22% from Q2 of 2024 and 57% (year-over-year);

3. the net profits of all the SEHK participants were up 34% during the previous 6 months to HKD15.6 billion.

The main driving forces are attributed to the steady growth of trading commission, reduction in overheads and interest expenses; within the revenue side, the net securities income was up 23% to HKD13.6 billion and income from advising on corporate finance was up 33% to HKD2 billion!

One point deserves attention is that the net profits of Category C brokers, which cater for general public and small retail investors, doubled to HKD2.5 billion, implying a holistic recovery of the brokerage business rather than being concentrated on the top category brokers.

SIGNIFICANCE:

As Dr Eric Yip, the SFC’s Executive Director of Intermediaries, said, “once again, the solid performance of our licensed corporations showcases the strength and agility of our financial industry in a fast-changing business landscape, underscoring their key role in driving Hong Kong’s continued success as a top international financial centre.”

4. HKMA to grant limited stablecoin licenses amid 77 stablecoin application

Main themes of the press are that:

1. the 77 applicants originated from a range of sectors comprising of banking, technology firms, asset manager, e-commerce platforms, payment companies and Web3 startups;

2. only a limited number of stablecoin licenses will be issued in the initial stage;

3. only applicants meeting strict compliance requirements will be granted approvals.

Key takeaways readers should know:

1. the Hong Kong Monetary Authority ("HKMA") would not publish the list of entities showing interests or submitting applications; and reiterated that communications with the applicants did not indicate any hints of regulatory approval;

2. the meetings were only meant to help applicants evaluate the necessity and maturity of their issuance plans before making a formal submission;

3. with the stablecoin licensing regime came into effect on 1 August 2025, it serves as a regulatory reference point to develop the virtual asset framework. As only a limited number of licenses will be granted, some applicants either postpone applications, partner with existing licensees or adopt alternative structures to meet the strict compliance thresholds. These adaptive adjustments amid the screening process help shape the evolving regulatory regime of the nascent stablecoin ecosystem.  

5. SFC and Dubai Financial Services Authority bolster ties in supervising cross-border investment management

The SFC and the Dubai Financial Services Authority (“DFSA”), the independent regulator of the Dubai International Financial Centre (“DIFC”), today signed a Memorandum of Understanding (MoU) to deepen cooperation on the regulatory oversight and supervision of collective investment scheme managers in each other’s markets to ensure compliance, governance, and cross-border regulatory alignment.

Key takeaways of the MOU:

1. underscoring the significance of cross-border regulatory collaboration and Hong Kong’s growing ties with the Belt and Road jurisdictions;

2. establishing a collaborative framework for consultation, cooperation and the exchange of information in order to enhance the regulators’ supervision and oversight of regulated entities which engage in cross-border investment management or advisory activities;

3. signifying the efforts of joint collaboration of the high-level meetings between the SFC and the DFSA over the years.

SIGNIFICANCE:

As comments from SFC and DFSA officials, the MOU is a consequence of strengthened SFC-DFSA partnership which underscores the shared commitment to mutual benefits of HK and DIFC as internation financial hubs, and efforts towards regulatory excellence, supervision and cross-border innovation between the two jurisdictions.

6. SFC and HKMA unveil roadmap to advance Hong Kong’s vision to be global fixed income and currency hub

The SFC and the HKMA jointly announced Hong Kong’s Roadmap for the Development of Fixed Income and Currency (“FIC”) Markets (the “Roadmap”) on 25 September 2025 to position the city strategically as a global FIC hub by fostering demand, liquidity and innovation.

An overview of the Roadmap is outlined as below with FOUR pillars and TEN initiatives:

Reinforcing Foundations

Pillar 1: Boosting issuance in primary market

Initiative 1: Lead by example through government bond issuance

Initiative 2: : Promote Hong Kong’s strengths to issuers and investors in target markets

Initiative 3: Expand investor base including family offices, funds and corporate treasury centres

Pillar 2: Enhancing liquidity in secondary market

Initiative 4: Finalize implementation of over-the-counter FIC derivatives regime

Initiative 5: Facilitate development of a repo central counterparty

Breaking New Ground

Pillar 3: Expand offshore RMB business

Initiative 6: Broaden offshore RMB usage

Initiative 7: Enhance Connect schemes to increase offshore RMB liquidity and RMB-related product offerings

Pillar 4: Next-generation infrastructure

Initiative 8: Future-proof FIC financial market infrastructure

Initiative 9: Support development of next-generation electronic trading platforms

Initiative 10: Facilitate market innovation and implementation of use cases for tokenized FIC products

SIGNIFICANCE:

The Roadmap will guide the policy making and implementation of the SFC and the HKMA in coming years to support the sustainable and diversified growth of Hong Kong’s capital markets. Comments from key officials highlight the significance of the Roadmap:

Dr. Kelvin Wong, Chairman of the SFC: “The Roadmap is poised to guide our marketevolution that will benefit issuers, investors and intermediaries alike for years to come”.

Mr. Eddie Yue, Chief Executive of the HKMA: “The Roadmap comprehensively set out our work focuses in the near future. We look forward to implementing the initiatives in collaboration with industry stakeholders.”

Ms. Julia Leung, Chief Executive Officer of the SFC: “The Roadmap reflects our close collaboration and shared commitment with the HKMA, industry partners and other stakeholders to enhance Hong Kong’ s vital role in bridging Mainland and international capital markets.”

Enforcement News

7. SFC Bans Former UBS Advisor Suen Kin-wing for Life Over Money Laundering and Contempt Convictions

On 2 September 2025, the SFC has imposed a lifetime ban on Mr. SUEN Kin-wing (“SUEN”), a former Associate Director at UBS AG (“UBS”), preventing him from re-entering the industry. This action follows SUEN's criminal convictions for money laundering and contempt of court, highlighting serious breaches of trust and regulatory standards.

Background of the Case

SUEN, who served as a Client Advisor at UBS from January 2014 to June 2018, was responsible for Type 1 and Type 4 regulated activities. The issues stemmed from his dealings with two Mainland Chinese clients who held a joint account at UBS. Facing challenges in transferring RMB funds from Mainland China to Hong Kong, the clients entered into an arrangement with SUEN to facilitate cross-border transfers.

Under this setup, the clients deposited over RMB132 million into Mainland bank accounts designated by SUEN between November 2016 and February 2018. SUEN provided what appeared to be legitimate transaction confirmations and bank statements showing the funds had reached the joint account. However, the clients later discovered that a substantial portion of the money was missing.

Investigations revealed that over HK$134 million had been diverted into two Hong Kong bank accounts controlled by SUEN. The Court determined these funds were proceeds of crime, as SUEN had defrauded or stolen them from his clients. He used the misappropriated money to fund a luxurious lifestyle, including purchases of high-end vehicles and properties in the UK and Mainland China.

Legal Outcomes

SIGNIFICANCE:

Given the severity of SUEN's actions, which demonstrated a profound lack of honesty and professionalism, the SFC has deemed him unfit and improper to hold any regulated position in the future. SUEN is currently neither registered with the Hong Kong Monetary Authority (“HKMA”) nor licensed by the SFC.

This case serves as a stark reminder of the consequences of financial misconduct and the SFC's zero-tolerance policy toward activities that undermine market confidence. Industry professionals are encouraged to review internal controls and compliance measures to prevent similar incidents.

8. SFC Bans Former Citigroup Executive Richard Charles Heyes for 5 Years Over Serious Misconducts

In a significant move underscoring the importance of senior management accountability, the SFC has imposed a five-year industry ban on Richard Charles Heyes (“Heyes”), a former key figure at Citigroup Global Markets Asia Limited (“CGMAL”). Effective from 15 September 2025 to 14 September 2030, the ban prevents Heyes from re-entering the financial industry in any licensed capacity.

Heyes, who served as a RO, Manager-In-Charge (“MIC”) of Key Business Line, board member, and Head of Pan-Asia Equities at CGMAL, has been held accountable for serious regulatory breaches and internal control lapses at the firm. These issues stem from a decade-long period (i.e. 2008–2018) where CGMAL's Cash Equities business disseminated mislabelled Indications of Interest (“IOIs”) and made misrepresentations to institutional clients during facilitation trades.

Key Details of the SFC's Findings:

The SFC's investigation highlighted Heyes' failure to fulfill his supervisory and managerial duties, which directly contributed to CGMAL's violations. Specifically:

These lapses allowed a culture prioritizing revenue over client interests and ethical standards to persist within CGMAL. The SFC emphasized that Heyes' neglect enabled the firm's internal control failures to continue unchecked for over ten years.

Factors Influencing the Sanction

In determining the five-year ban, the SFC considered:

1. The severity of Heyes' neglect, which enabled prolonged regulatory breaches.

2. His extensive industry experience, which should have ensured higher standards as an RO, MIC, board member, and senior manager.

3. The need to send a strong deterrent message to the industry.

4. Mitigating factors, including Heyes' cooperation with the SFC, withdrawal of his appeal to the Securities and Futures Appeals Tribunal, and his otherwise clean disciplinary record.

This action follows prior SFC sanctions against CGMAL itself for the same underlying issues.

For more details of the case, please refer to the Statement of Disciplinary Action.

SIGNIFICANCE:

Christopher Wilson, SFC's Executive Director of Enforcement, stated: "Senior management of a licensed corporation bears primary responsibility for ensuring the firm’s maintenance of appropriate standards of conduct and adherence to proper procedures. By exerting significant pressure on the trading desks to grow CGMAL’s market share while failing to be vigilant for telltale signs that his subordinates were achieving this by dishonest means, Heyes neglected and failed to properly discharge his managerial responsibility."

Wilson added that the SFC will actively use the MIC regime to hold senior executives accountable, aiming to foster cultural and behavioral changes among intermediaries.

This case serves as a stark reminder for financial institutions in Hong Kong and beyond: Senior leaders must prioritize robust compliance frameworks, vigilant oversight, and ethical practices. With regulators increasingly focusing on individual accountability, firms should review their internal controls, training programs, and escalation procedures to prevent similar failures.

9. SFC Reprimands and Fines Instinet Pacific Limited $8 Million for Cross Trade Reporting Failures

The SFC has issued a reprimand and imposed an $8 million fine on Instinet Pacific Limited (Instinet) for non-compliance with reporting requirements for direct business transactions, commonly known as cross trades, to The Stock Exchange of Hong Kong Limited (“SEHK”).

Key Details of the Case

The SFC's investigation uncovered that from December 2012 to March 2018, Instinet failed to report 8,817 pairs of cross trades totalling approximately $25.9 billion in value between its clients and an affiliated company. This breach violated the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. During this period, Instinet lacked any internal policies, procedures, or monitoring mechanisms for reporting cross trades to the SEHK, and it conducted no reviews of its trade reporting processes.

1. Scope of the Breach: 

The unreported trades spanned over five years and involved significant transaction volumes, highlighting systemic deficiencies in Instinet's compliance framework.

2. Code and Rule Violations: 

The failures contravened the SFC's Code of Conduct and Rules of the Exchange, which mandates proper cross trades reporting.

In deciding the disciplinary sanction, the SFC has taken into account all relevant circumstances, including the duration of Instinet’s failure, the number of unreported cross trades and the sum involved, and Instinet’s initiative to cease the relevant trade flows and cooperation with the SFC in resolving the SFC’s concerns.

For more details of the case, please refer to the Statement of Disciplinary Action.

SIGNIFICANCE:

This enforcement action reinforces the SFC's commitment to upholding market transparency through strict adherence to reporting obligations. Financial institutions must prioritize robust internal controls, regular reviews, and comprehensive policies to monitor trade reporting. Failures in these areas can lead to significant penalties and reputational damage. Firms are encouraged to audit their compliance systems, particularly for cross trades and affiliated transactions, to align with SEHK and SFC standards.

10. SFC Upholds Fine on RaffAello Capital for Sponsor Failures in Paprika Listing

In a recent decision, the Securities and Futures Appeals Tribunal (“SFAT”) has affirmed the SFC reprimand and $4 million fine against RaffAello Capital Limited (“RaffAello”) for shortcomings in its role as sponsor for Paprika Holdings Limited's Paprika listing application. This case underscores the critical importance of rigorous due diligence in Hong Kong's capital markets, highlighting lapses that could undermine investor confidence.

Background on the Case

RaffAello, a licensed corporate finance advisor, sponsored Paprika's application for listing on the Growth Enterprise Market (“GEM”) of the Stock Exchange of Hong Kong Limited ("SEHK"), submitted in June 2017 but withdrawn in April 2018. Paprika, a handbag and accessories retailer, relied heavily on retail sales, accounting for about 90% of its revenue in the two financial years ending March 2017, with over 80% from physical stores.

The SFC's investigation revealed that RaffAello failed to conduct reasonable due diligence and lacked professional scepticism when reviewing Paprika's provided information. Key issues centered on suspicious retail transactions and questionable relationships with key business partners.

Key Findings

SIGNIFICANCE:

The SFC initially proposed a $13 million fine but reduced it to $4 million due to RaffAello's financial constraints, a decision the SFAT upheld to avoid liquidation and harm to clients. Chaired by Mr. Michael Hartmann, GBS, the Tribunal emphasized sponsors' duties under the Code of Conduct: when red flags arise, additional due diligence is mandatory, including detailed documentation and consultations (e.g., with reporting accountants) rather than assumptions.

The Tribunal noted: "If issues of concern are identified, it is not sufficient for the sponsor simply to investigate the matter, make a bald note of that fact... a coherent note should be made of what has been discovered and what has been resolved." Over-reliance on management's representations was deemed unreasonable. Related actions include a two-year industry ban for Mr. Tsang Kwong Fai, RaffAello's responsible officer overseeing the application.

This ruling serves as a stark reminder for sponsors to apply professional scepticism and thorough investigations. It reinforces SFC's commitment to maintaining listing integrity, potentially influencing future due diligence practices in Hong Kong's vibrant IPO market.

11. SFC Reprimands and Fines Roofer Securities $2.1 Million for Client Money Mishandling

The SFC has issued a reprimand and imposed a $2.1 million fine on Roofer Securities Limited ("Roofer") for violations related to the improper handling of client funds. This action highlights the SFC's ongoing commitment to enforcing strict segregation rules to protect investor assets in Hong Kong's financial markets.

Case Overview

The investigation, initiated following a referral from the Hong Kong Exchanges and Clearing Limited (“HKEX”), uncovered 12 incidents between 8 February 2021, and 7 July 2022, where Roofer failed to maintain adequate funds in its segregated client account. In one notable instance, the shortfall reached $15.5 million.

These breaches stemmed from several operational lapses:

• Using client account funds to cover margin calls (actual or anticipated) from HKEX which is not paid in accordance with a written direction or standing authority form the client and/or used to meet the client’s settlement or margin requirement.

• Failure in client money segregation due to inadequate management of daily online bank transfer limits.

• Human errors by staff.

The SFC determined that these failures violated the Securities and Futures (Client Money) Rules and the Code of Conduct for Persons Licensed by or Registered with the SFC.

Mitigating Factors and Sanctions

In determining the penalty, the SFC considered various factors, including:

• No clients suffered financial losses due to the incidents.

• Roofer promptly rectified the under-segregation in each case and implemented remedial measures, such as strengthening internal controls and processes.

• The firm's full cooperation with the SFC during the investigation.

• Roofer's clean prior disciplinary record.

For more details of the case, please refer to the Statement of Disciplinary Action.

SIGNIFICANCE:

This case serves as a reminder to licensed corporations of the critical need for robust internal systems to ensure client money segregation. Failures in this area can erode market trust and expose firms to significant regulatory penalties. The SFC's balanced approach factoring in remediation and cooperation, demonstrates its focus on proportionate enforcement while upholding high standards.

12. SFC Secures Disqualification Orders Against Five More Former Directors of Superb Summit Due to misappropriate assets

The SFC has successfully obtained disqualification orders from the Court of First Instance against an additional five former directors of Superb Summit International Group Limited (“Superb Summit”), bringing the total number of disqualified directors to 10. This latest action emphasizes the SFC's rigorous enforcement of director duties in cases involving misleading acquisitions and non-existent assets. This follows earlier disqualifications in June 2025 against five other former directors: Mr. Lee Chi Kong (10 years), Mr. Wong Yun Kuen (7 years), and Messrs. Lam Ping Kei, Wong Choi Fung, and Yeung Kwong Lun (5 years each). The SFC's investigations and proceedings against additional former directors and officers of Superb Summit continue.

Director(s) involved:

Details of the Breaches

Superb Summit, listed on the Main Board of The Stock Exchange of Hong Kong Limited from September 2001 until its delisting in June 2020, engaged in two problematic acquisitions:

• 2007 Acquisition: LAW, LI, QIU, AND CHAN failed to adequately review key documents or critically assess the methodologies and assumptions used by professionals during due diligence on the target company's alleged forestry assets.

• 2009 Acquisition: LAW, CHENG, AND CHAN neglected to properly verify the ownership of the claimed forestry assets. They also approved a company announcement containing false or misleading information about these non-existent assets.

The SFC initiated proceedings under section 214 of the Securities and Futures Ordinance in December 2020. The disqualifications were resolved via the Carecraft procedure, where the court approved orders based on agreed facts and proposed sanctions.

Overview of the Disqualifications

The affected individuals include three former executive directors, LAW, LI and CHENG and two former independent non-executive directors, QIU and CHAN. The orders, effective immediately, prohibit them from serving as directors or participating in the management of any corporation in Hong Kong or elsewhere for periods ranging from two and a half to four years.

Additionally, the former directors have been ordered to cover the SFC's costs in the proceedings. These sanctions follow their admissions of breaching duties and negligence related to Superb Summit's acquisitions in 2007 and 2009, which involved purported forestry assets that proved to be fictitious.

**For the detail of judgment and the prior disqualifications, please refer to:

-the Judiciary’s website (Case No. HCMP 2305/2020); or

-the SFC’s press release dated 11 July 2025,.**

SIGNIFICANCE:

These orders reinforce the SFC's stance on accountability for directors, particularly in due diligence and disclosure processes. They highlight the severe consequences of negligence in approving transactions with misleading elements, serving as a cautionary tale for boards in Hong Kong's listed companies to uphold rigorous standards to protect investors and maintain market integrity.

13. SFC Suspends Former Agg. Asset Management RO Chow Tsz Lam for 12 Months Over Fund Mismanagement

The SFC has suspended Mr. CHOW Tsz Lam (“CHOW”), a former RO and manager-in-charge at the now-dissolved Agg. Asset Management Limited (“Agg”), for 12 months effective from 2 September 2025, to 1 September 2026. This disciplinary measure addresses failures in fund management practices that exposed investors to undue risks and conflicts of interest.

Investigation Findings

The SFC's probe revealed that Agg, acting as investment manager for a Cayman-incorporated fund, allocated up to 100% of the fund's assets into debentures issued by entities controlled by Mr. NG Ka Shun (“NG”), Agg's sole shareholder, director, and fellow RO. This approach neglected to mitigate conflicts of interest and adequately manage associated risks (concentration risks and credit risks). Furthermore, Agg directed the fund into two debentures seemingly designed to artificially inflate the fund's net asset value.

CHOW, as an RO and senior management member, was found to have fallen short in ensuring Agg operated in the best interests of the fund and its investors, while adhering to regulatory standards. Although primary responsibility lay with NG (who made the investment decisions), CHOW's oversight lapses contributed to these breaches.

For more details of the case, please refer to the Statement of Disciplinary Action.

SIGNIFICANCE:

This case underscores the SFC's emphasis on robust conflict management and risk oversight in asset management, particularly where personal interests intersect with firm operations. It serves as a reminder for ROs and senior executives to prioritize investor protection and regulatory compliance, with self-reporting potentially mitigating penalties.

The SFC previously issued a lifetime ban and $1.7 million fine to NG for window-dressing Agg's financial resources and mismanaging two funds (see SFC press release dated 23 December 2024). Agg itself faced a restriction notice in April 2020 prohibiting regulated activities, leading to its dissolution in July 2024 and deemed license revocation.

14. SFC Pursues Disqualification Orders Against Former Directors of Century Energy International Holdings Limited

The SFC has initiated legal proceedings to seek court orders disqualifying four former directors of Century Energy International Holdings Limited ("CEIHL", formerly known as China Oil Gangran Energy Group Holdings Limited). The action targets individuals accused of misconduct that led to substantial financial losses for CEIHL.

Background on CEIHL

CEIHL, listed on the Growth Enterprise Market of the SEHK since 18 May 2011, was primarily involved in trading refined oil and methyl tert-butyl ether, as well as manufacturing and selling power and data cords. CEIHL's troubles stem from the loss of control over four major operating subsidiaries in Mainland China, which accounted for over 80% of its total revenue for the year ended 31 March 2018, and more than 40% of its total assets as of that date.

These subsidiaries were deconsolidated from CEIHL's accounts effective 1 January 2019, resulting in a staggering loss of $184 million for the fiscal year ended 31 March 2019.

Allegations of Misconduct

1. The SFC alleges that these former directors failed to adequately supervise the Mainland subsidiaries and did not act in the best interests of the company. This prolonged lack of oversight contributed to the deconsolidation of the subsidiaries and the ensuing financial losses.

2. Furthermore, Mr. Ho, Ms. Yang, and Mr. Lau are accused of being responsible for the publication of a 2014 circular that contained inaccurate or misleading information about one of the operating subsidiaries.

3. Under section 214 of the SFO, the Court of First Instance may impose disqualification orders preventing individuals from serving as directors or being involved in the management of any corporation for up to 15 years if they are found responsible for conduct involving defalcation, fraud, misfeasance, or other misconduct toward the company or its members.

The SFC's proceedings name the following accused directors:

1. The SFC alleges that these former directors failed to adequately supervise the Mainland subsidiaries and did not act in the best interests of CEIHL. This prolonged lack of oversight contributed to the deconsolidation of the subsidiaries and the ensuing financial losses.

   
   

2. Furthermore, HO, YANG, and LAU are accused of being responsible for the publication of a 2014 circular that contained inaccurate or misleading information about one of the operating subsidiaries.

   
   

3. Under section 214 of the SFO, the Court of First Instance may impose disqualification orders preventing individuals from serving as directors or being involved in the management of any corporation for up to 15 years if they are found responsible for conduct involving defalcation, fraud, misfeasance, or other misconduct toward the company or its members.

SIGNIFICANCE:

This case highlights the SFC's commitment to enforcing corporate governance standards and holding directors accountable for oversight failures in Hong Kong-listed companies. Investors in Hong Kong-listed companies should note the potential risks associated with operations in cross-border subsidiaries and the importance of robust internal controls.

[End of ComplianceOne Newsletter – September2025]

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