Kam, Douglas Jun Kow

MMT doesn't find market misconduct in CITIC (0267)'s 2008 circular
SFC, 10-Apr-2017
The MMT says the SFC failed to show that the statement of "no material adverse change" (MAC) caused the price to remain stable, and it is irrelevant that if the huge FX loss had been disclosed, it would have crashed the price. The SFC in our view erred in focussing on the "financial position" (the balance sheet) and ignoring the "trading position" (the income statement). The MMT says there hadn't been a MAC in the financial position as the loss, while price-sensitive, was bearable. That's wrong in our view because it takes a creditor's view rather than a shareholder's view of what is materially adverse, and the Listing Rules were written primarily for equities. The MMT didn't examine whether there was a MAC in the trading position, because the SFC didn't ask them to. Time has moved on - it is now civil Market Misconduct to fail to disclose price-sensitive Inside Information, but in 2008 it was just a breach of the Listing Rules.

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