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香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CENSURES:
1. Orient Securities International Holdings Limited (Company)
IMPOSES A DIRECTOR UNSUITABILITY STATEMENT and CENSURE against:
2. Ms Lee Nga Ching, former executive director of the Company;
3. Mr Siu Kin Wai, former independent non-executive director of the Company;
4. Ms Chan Man Yi, former independent non-executive director of the Company;
IMPOSES A PREJUDICE TO INVESTORS’ INTERESTS STATEMENT and CENSURE against:
5. Mr Tang Chung Wai,1 former independent non-executive director of the Company;
CRITICISES:
6. Ms Suen Tin Yan, former executive director of the Company; and
7. Ms Luk Claire Heun Ling, former independent non-executive director of the Company.
The Director Unsuitability Statement is a statement that, in the Exchange’s opinion, Ms Lee, Mr Siu, and Ms Chan are unsuitable to occupy a position as director or within senior management of the Company or any of its subsidiaries.
The Prejudice to Investors’ Interests Statement is a statement that, in the Exchange’s opinion, had Mr Tang remained on the board of directors of the Company, his retention of office would have been prejudicial to the interests of investors.
This case involves serious failures of the board to appropriately manage and supervise the Company’s money lending business. Despite increasing defaults of borrowers and auditors raising red flags as to the enforceability of loans, the Company’s directors failed to act and safeguard the Company’s assets which led to significant impairment losses for the Company.
Between 2015 and 2022, the Company granted and extended loans totalling HK$378 million (inclusive of interest) to individual clients. The Company only conducted high-level due diligence before granting or extending the loans and failed, among other things, to ensure that loan collateral in the form of properties in the PRC was properly registered to enable the Company to enforce the collateral in case of default.
The Company’s auditor had alerted the Company’s audit committee about the non-registration of the loan collateral as early as 2018 and advised them to communicate with the Company as this would materially affect the enforceability of the collateral. Despite repeated reminders by the auditors and the borrowers failing to substantially repay the loan principal and interest over the course of several years, the Company and its directors consistently failed to take adequate steps to safeguard the Company’s assets. Instead, the loans were continuously extended.
Ultimately, all the borrowers defaulted on the loans causing the Company to make an impairment provision of HK$145 million for FY2022/23. As at 31 March 2024, the total impairment losses recognised amounted to HK$181 million for FY2023/24.
An internal control review found that the Company had various internal control deficiencies which contributed to the Company’s prolonged failure to conduct proper due diligence, register the loan collateral, take adequate steps to react to the loan defaults, and, ultimately, to safeguard its assets. The internal control deficiencies also contributed to the Company failing to realise that the loans and their extensions constituted notifiable transactions and to announce or seek shareholders’ approval for them in a timely manner.
For details concerning the breaches by the Company and the directors, please refer to the Statement of Disciplinary Action (see link below).
The Company and the directors have contributed to an expedited resolution of the matter by agreeing to settle this disciplinary action.
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The board collectively and individually bears responsibility for the management and operations of an issuer. This requires each director to take an active interest in the issuer’s affairs, obtain a general understanding of its business and follow up anything untoward that comes to his/her attention. Where red flags have been identified, it is the duty of all directors to make tangible efforts to investigate, and follow up on whether, and how, the red flags have been addressed. Such red flags, in the context of a money lending business, include situations like prolonged extensions to loans being granted despite no or insignificant repayment, or, concerns raised by professional advisers, such as the Company’s auditors, about the enforceability of loan collateral, among others. |
Note:
- In addition to the Exchange’s sanction, Mr Tang has provided an undertaking that he will not take up any directorship or senior management position in any issuer listed in Hong Kong or its subsidiaries in the future.
Ends
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