After six years, the insider trading case triggered by Foxconn‘s parent company Hon Hai Precision Industry’s acquisition of the equity of Hong Kong listed company Qianliyan Holdings Co., Ltd. (“Qianliyan”) through its subsidiary Foxconn (Far East) has finally come to an end.
On February 16, the court of first instance of the Hong Kong Special Administrative Region ordered that Wei Juan, the niece of Yi Fangfang, the former executive director and chief executive officer of Huaxia Energy Holdings (8009. HK), and Huang Yi, the husband of Wei Juan, should compensate 63 investors for the illegal profits of HK $12949875 obtained from insider trading.
Last November, the court of first instance of the Hong Kong Special Administrative Region ruled that Yi Fangfang, Wei Juan and Huang Yi illegally made HK $12.9 million through insider trading during Foxconn (Far East)’s acquisition of 50.07% equity of Qianliyan in 2016.
investors receive compensation in proportion
In April 2016, Foxconn (Far East) funded the acquisition of 50.07% of the equity of Qianliyan, which was a Hong Kong listed company at that time, and then the company was renamed Xun Zhihai. Before the transaction was officially announced, i.e. from the end of February to April 12, 2016, Yi Fangfang participated in the negotiation on the acquisition transaction as the representative of Qianliyan’s controlling shareholder and obtained relevant transaction information.
On April 12, 2016, Qianliyan suspended the trading of shares and issued the acquisition announcement two days later. However, before the announcement of the acquisition, i.e. from March 1 to April 12, 2016, Yi Fangfang had purchased 22.72 million shares of Qianliyan at an average price of HK $0.4295 per share through the trading accounts of Wei Juan and Huang Yi in HuiFu finance, Everbright Securities Company Limited(601788) (Hong Kong) and Dahua Jixian (Hong Kong).
After the announcement of the transaction, the stock price of Qianliyan rose sharply. In just over a month, Yi Fangfang sold 15.65 million shares at an average price of HK $1.259 per share, making a profit of HK $12.9 million. The court ruling also means that all three will take back the illegal profits six years ago.
After the civil judgment of the court was released, the CSRC said that the relevant amount would be paid to the investors affected by the sale of shares to Wei Juan or Huang Yi as the counterparty from February 29 to April 12, 2016 through Ernst & young enterprise financial services Co., Ltd., the manager appointed by the court, in proportion to the number of shares.
related assets have been frozen across the border
Although the whole case took six years, in order to ensure the interests of investors, the CSRC applied for an interim order as early as September 2016 to freeze the profits from insider trading.
According to the public information of the CSRC, Yi Fangfang left the HKSAR shortly after the investigation began, while the other two defendants have been living in Shenzhen. According to the announcement of Huaxia energy holdings, Yi Fangfang has more than 20 years of experience in commerce, real estate, finance and corporate governance. He was the president of Jiangxi rare earth metal tungsten group (Hong Kong) Co., Ltd. after August 12, 2016, Yi Fangfang no longer served as the executive director and chief executive of Huaxia energy holdings.
“The order issued by the court will restore the investors who traded with Wei Juan and Huang Yi to the situation before the transaction as far as possible. These 63 investors can not detect that they are trading with Wei Juan and Huang Yi who are engaged in insider trading. If they know the relevant situation, they will not sell their shares to them, let alone at that price.” Thomas Atkinson, executive director of the regulatory enforcement department of the CSRC, said that violators should be responsible for the consequences of illegal acts, including the costs of recovery or remediation, rather than innocent investors or the market.
