Monday 16th November 2020

Dear Readers,

Here I am again! Six months post-diagnosis and thanks to the power of pharmaceuticals suppressing the cancer, I am functioning pretty well, or at least functioning better than the Legislative Council. Thank you for so many good wishes to which I could not possibly respond individually. The bucket-list is on hold of course, waiting for travel to become feasible again without the risk of quarantine preventing my treatment. With rearranged priorities, I can't write as often as before, but I sometimes feel compelled to speak out, and today's lead article is one of those times.

Discover COVID cases with behavioural economics, not force of law
The HK Government has again displayed its authoritarian streak by introducing a mandatory testing law. Instead, citizens and their close contacts should be compensated for as long as they are compulsorily isolated after one of them tests positive. For the self-employed, this would remove a deterrent to seeing a doctor when sick, and thereby also reduce the spread of other diseases. (16-Nov-2020)

Independent shareholders veto Tongda Hong Tai (2363) Whitewash Waiver
The largest shareholder wanted to underwrite a 1:1 open offer of new shares, potentially obtaining majority control without making a General Offer. Howel Thomas and his Wykeham Capital Asia Value Fund made sure that didn't happen, using the 75% approval requirement introduced in 2018. (16-Nov-2020)

KPMG supports one Country, three singing accountants
But are they tenors? Harmonising in the annual report of Shenwan Hongyuan (6806). Also, HK is "overseas" from PRC - so not part of it then? (12-Nov-2020)

A New Ray of light on an Enigma Network case
A decision quietly posted on the SFAT website reveals that Zhou Ling, ex-Chairman of New Ray Medicine (6108) is suspected by the SFC to have committed "misconduct and obtained secret profits from certain transactions" by NRM. Earlier gazetted Restriction Notices on a client at 2 brokers now make sense - the SFC has reduced disclosure in that area so much as to make the publication meaningless. (26-Oct-2020)

Credit Suisse fined HK$2.1m for software cock-up causing 8,042 bad option tradesStatement of Disciplinary Action
SFC, 9-Nov-2020
The SDA reveals that a latent bug was introduced into Mercury Direct, the firm's market-making software, in 2013, causing it on 28-Feb-2019 to send options quotes priced for March 2019 but tagged as March 2020. Given the time value of options, these were underpriced and were quickly snapped up by the market, until 7,837 of them were cancelled. The 205 honoured trades caused the firm a loss of US$307k.

SFC fines Goldman Sachs (Asia) LLC US$350m over 1MDB scandalStatement of Disciplinary Action
SFC, 22-Oct-2020
The record fine, which goes to the HK Government, is about HK$364 for every person in HK. The SDA reveals that GS earned an average 9% on the bond issues, way above market rates, and nobody at GS seemed to think that was suspicious. Makes us wonder who was running the compliance department - but such persons are not SFC-licensed, so beyond the SFC's reach. The settlement doesn't suspend GS from carrying on its business in HK.

HK Judge misreads HK company law
HK Court of First Instance, 9-Oct-2020
Justice Linda Chan rejects the Allied Props (0056) privatisation, partly because of the voting headcount. Neither she nor Senior Counsel William Wong, leading 2 more barristers, realise that the headcount on privatisations was scrapped years ago. She also dislikes that part of the payout was coming from Allied Properties itself, and there would be no such dividend if the scheme was rejected. The offer was at a 66% discount to NAV but was 99% approved as minority shareholders again threw in the towel, which says something about the state of corporate governance in HK.

SFC bans Fabian Shin Yick, ex-CEO of Yi Shun Da Capital, for 20 months over IPO sponsor failuresSFAT Ruling
SFC, 16-Sep-2020
The IPO company is unnamed, but we can tell you it is Imperial Sierra Group Holdings Ltd, as mentioned in a procedural ruling from the SFAT, where YSD is appealing the SFC's decision to fine it HK$4.5m and ban it. Also, barrister Norman Nip's briefing fee is HK$50k. The IPO did not proceed, following a report by "Blazing Research" alleging fraud.

And much more besides...
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David M. Webb