SFC helps HKEX in investigation of China Ecotourism (1371) over dubious loans and investment

Comment: the toothless Exchange cannot fine or jail, it only handles breaches of Listing Rules. The SFC helped trace funds, but why isn't it taking civil action under SFO, or criminal prosecution via the Department of Justice, if needed?

SFC and HKEX collaborate in enforcement action against Main Board-listed company over dubious investment and financial arrangements

Issue date: 2024-04-25 16:44:52

The Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (Exchange) have joined hands in an enforcement action to secure a disciplinary outcome by the Exchange against China Ecotourism Group Limited (China Ecotourism) and its seven current and former directors (Note 1 to 4).

The investigation centred on their misconduct in granting 13 loans of approximately HK$363 million and RMB91 million to nine borrowers, and acquiring a 37.5% interest in a blockchain technology company for HK$35 million.

The Exchange initially discovered substantial impairments related to the above-mentioned transactions in China Ecotourism’s annual results for the year ended 31 December 2019. The matter was referred to the SFC whose investigation uncovered several significant findings.

Notably, the SFC’s investigation revealed that some of the loan proceeds and investment subscription money had been paid to individuals and entities related to two former EDs, Ms Donna Chan Tan Na and Ms Lau Ting. These findings raised concerns as to whether the two former EDs failed to discharge their fiduciary duties as directors. The SFC shared with the Exchange relevant fund tracing information and other evidence it obtained regarding the fund transfers while it continues its own investigation.

Having considered all the evidence, the Listing Committee made findings, amongst others, that the fund flows raised concerns as to whether there were some other arrangements involving the two former EDs and the relevant borrowers. These fund flows also raised serious concerns as to the discharge of fiduciary duties as directors by the two former EDs. In particular, Lau failed to manage conflicts of interest properly because an entity jointly held by her appeared to have received certain loan proceeds.

The Exchange’s disciplinary actions included, among other things, imposing prejudice to investor’s interests statements against the duo and a current ED Mr Wu Jing Wei. They had been involved in the approval of the relevant loans while Donna Chan also handled the investment. In the Exchange’s opinion, the retention of office by the two former EDs would have been, and by Wu is, prejudicial to the interests of investors.

The SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “The board of directors of a listed company, including its audit committee, has the duty to act in good faith and in the best interest of the company. They should ensure that loan transactions are subject to effective vetting, risk assessment, due diligence and approval process. They should also ensure that appropriate and effective internal controls are in place, including measures for monitoring repayments and assessing impairments, such that loans are properly accounted for and disclosed in financial statements.”

“This enforcement action showcases the effective regulatory outcome achieved through strategic coordination between the SFC and the Exchange. The SFC will continue its collaboration with the Exchange and other regulatory and law enforcement agencies in combating corporate misconduct to uphold corporate governance and protect investors.”

In a joint statement issued in July 2023 with the Accounting and Financial Reporting Council, the SFC reiterated the importance of proper conduct in the financial activities of listed companies, particularly when it comes to granting loans. It emphasised that the board of directors, including audit committees, should be mindful of their duties to prevent the loss or misuse of listed companies’ assets (Note 5).



  1. The Stock Exchange of Hong Kong Limited is a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX).
  2. The Exchange issued a press release in relation to its disciplinary actions against China Ecotourism and its directors today.
  3. China Ecotourism is formerly known as China LotSynergy Holdings Limited.
  4. The seven current and former directors are: executive director (ED), Mr Wu Jing Wei; former chairman, ED and chief executive officer, Ms Donna Chan Tan Na; former EDs, Ms Lau Ting and Mr Li Zi Kui; independent non-executive director (INED), Mr Chan Ming Fai; and former INEDs, Mr Cui Shu Ming and Mr Huang Sheng Lan.
  5. Please see the joint statement issued by the SFC and the Accounting and Financial Reporting Council on 13 July 2023 to combat misconduct in relation to loans, advances, prepayments and similar arrangements made by listed companies.
News captured as of:2024-04-25 16:44:52

Source: SFC



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