Court disqualifies Lin Supeng, ex-ED of Anxin-China (ex-1149.HK) for 8 years
There was massive overstatement of cash balances in the audited accounts for 2011 to 2013, during which the group reported massive profit margins. So why didn't auditors BDO Ltd detect this before finally noticing during the 2014 audit? The audits were signed for BDO in 2011 and 2012 by Peter Chow Tak Sing and in 2013 by Lam Pik Wah. The group provided false bank records to the auditor, but for material amounts, auditors should obtain confirmations directly from banks (see HKSA 505). Did they? Or were the bank staff complicit in this?
SFC obtains court order to disqualify former executive director of Anxin-China Holdings Limited for eight years
Issue date: 2021-07-13 16:48:07
The Securities and Futures Commission (SFC) has obtained a disqualification order in the Court of First Instance against the former executive director of Anxin-China Holdings Limited (Anxin), Mr Lin Supeng (Notes 1 to 5).
Lin was disqualified from being a director and being involved in the management of any listed or unlisted corporation in Hong Kong, without the leave of the court, for a period of eight years.
The order was made after Lin’s admission that he failed to discharge his duties with due and reasonable skill, care and diligence in the course of acting as a director of the company and to carry out his duties to the requisite standard in ascertaining the company’s financial position.
The SFC’s investigation found that Anxin grossly overstated its cash position between 2011 and 2015. In particular, the company’s cash position in the audited consolidated financial statements for the two years ended 31 December 2012 and 2013 were overstated by $1.26 billion and $1.73 billion, respectively.
To cover up the overstated cash position, Anxin provided false bank records to its then auditors for its 2014 audit. It also provided the same false records to the independent forensic investigator appointed to conduct an investigation into the discrepancies identified by its auditors between the banking records and the company’s management accounts.
In addition, Anxin informed the public of the false findings that its internal special investigation team fabricated to cover up the discrepancies over the company’s cash position.
The SFC’s proceedings against other former senior management of Anxin are ongoing.
- Anxin was listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) on 24 November 2003 until its listing status was cancelled by SEHK with effect from 20 December 2018. Lin was an executive director of Anxin from 3 February 2010 to 16 February 2016.
- The legal proceedings were commenced under section 214 of the Securities and Futures Ordinance (SFO).
- Under section 214 of the SFO, the court may make an order disqualifying a person from being a company director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs having been conducted in a manner, among other things, involving defalcation, fraud, misfeasance or other misconduct towards it or its members; resulting in its members or any part of its members not having been given all the information with respect to its business or affairs that they might reasonably expect; or unfairly prejudicial to its members or any part of its members.
- The orders were made following the Court’s approval that the proceedings could be disposed of by way of Carecraft procedure where the Court determines the appropriate orders to be made based on an agreed statement of facts and agreed proposed orders.
- The judgment is available on the Judiciary’s website (Court Reference: HCMP314/2020).