Key dates
- 2 June 2023
- - ENM and Offeror announced proposed privatization, engaging Computershare for proxy and voting services
- 22 September 2023
- - Choi learned inside information on privatization failure from proxy forms
- 25 September 2023
- - Choi sold 1,500,000 ENM shares, avoiding HK$289,500 loss ahead of announcement
- 26 September 2023
- - Scheduled court meeting for privatization voting
- 27 September 2023
- - ENM announced privatization lapse; share price fell 10.26% to HK$0.35
Suggested considerations
- Enhance insider dealing training: Mandate annual refreshers for staff handling corporate actions, emphasizing SFO prohibitions on dealing with inside information (e.g., voting outcomes, privatization status).
- Strengthen information barriers: Implement robust Chinese walls between operational teams (e.g., proxy coordinators) and personal trading, with pre-approval for staff trades in client-related securities.
- Monitor personal trading: Require disclosure and review of employees' holdings in companies involved in serviced transactions; automate alerts for unusual trading pre-announcements.
- Conduct insider lists and attestations: Maintain accurate lists of insiders during corporate events; require signed attestations of non-dealing.
- Audit workflows: Review processes for proxy form handling and voting scrutiny to prevent incidental access to inside information.
What changed
This is an enforcement case, not a regulatory change; no new rules, requirements, or amendments to the SFO or Listing Rules were introduced. It exemplifies ongoing application of existing insider dealing prohibitions under SFO sections 270-271, where individuals with inside information (e.g., on privatization failure from proxy forms) must not deal in relevant securities. The court's emphasis on "immediate custodial sentence" for professionals in positions of trust signals stricter sentencing norms for such offenses.
Compliance impact
Urgency: Medium - This reinforces existing obligations rather than imposing new ones, but the custodial sentence for a mid-level professional elevates personal risk awareness, prompting immediate policy reviews to mitigate SFC scrutiny. It matters for firms in investor services or with staff in trust positions, as SFC vows "robust enforcement" amid a spate of market abuse cases, potentially increasing surveillance and investigations.