New disclosure requirements imposed on listed companies under the Securities and Futures Ordinance (“SFO”) have been effective since on 1 January 2013.
Under these requirements, a listed company is obliged to disclose inside information as soon as reasonably practicable when the information has or ought reasonably have come to the knowledge of an officer of the listed company.
Officers of a listed company will also be held responsible - where a listed company has breached a disclosure requirement, the officer will also be in breach if the company’s breach was the result of the officer’s intentional, reckless or negligent conduct, or if such officer has not taken all reasonable measures to ensure proper safeguards exist to prevent such a breach.
This is the first set of proceedings in the Market Misconduct Tribunal (“MMT”) in relation to these disclosure requirements.
In late December 2012, PT First Media Tbk filed a petition under the Indonesian Law on Bankruptcy and Suspension of Obligation for Payment of Debts against AcrossAsia (the “Petition”). The Central Jakarta District Court issued a summons to AcrossAsia requiring that it to appear in court to give testimony at the hearing of the Petition (the “Summons”).
AcrossAsia received copies of the Petition and the Summons, in the original Indonesian Bahasa language, by facsimile dated 2 January 2013. English translations of these documents were provided to AcrossAsia on 4 January 2013 and circulated amongst its officers, Mr Albert Saychuan Cheok and Mr Vicente Binalhay Ang.
On 8 January 2013, Mr Cheok and Mr Ang arrived in Jakarta and obtained verbal legal advice on the Petition from Indonesian lawyers. On 15 January 2013, at a hearing in the Indonesian court, the Petition was granted. However, AcrossAsia did not disclose such information until the issue of a holding announcement on 17 January 2013.
It was alleged that AcrossAsia failed to disclose information to the public about the Petition and the Summons, which constituted inside information, as soon as practicable after the inside information came to its knowledge on or about 4 January 2013. It was alleged, therefore, that was a breach of the disclosure requirement imposed by section 307B(1) of the SFO.
It was further alleged that Mr Cheok and Mr Ang’s negligent conduct resulted in AcrossAsia’s breach of the disclosure requirement such that they were also in breach of the requirements pursuant to section 307G(2)(a) of the SFO.
The MMT Report
The MMT decided that AcrossAsia had committed market misconduct in failing to disclose inside information as soon as reasonably practicable as a result of the negligent conduct of Mr Cheok and Mr Ang.
In respect of the wording “as soon as reasonably practicable”, looking at the specific facts of the case, the MMT said it was unrealistic to expect an announcement to be made on 4 January 2013 because, at that time, no proper legal advice leading to a rational and comprehensive understanding of the legal position of the Petition in the foreign jurisdiction had been received. As such, in the opinion of the MMT, disclosure should have been made after 8 January 2013, the date when legal advice had been obtained.
Having considered the relevant facts in this matter, the MMT ordered that (i) AcrossAsia, Mr Ang and Mr Cheok pay a fine in the respective sums of HK$600,000, HK$600,000 and HK$800,000; (ii) Mr Cheok and Mr Ang complete a SFC approved training programme on compliance with the inside information disclosure requirements; and (iii) AcrossAsia, Mr Ang and Mr Cheok pay the Government’s costs of the proceedings and the SFC's investigation and legal costs.
This case has provided the opportunity for the MMT to shed some light on the phrase “as soon as reasonably practicable” and to confirm that it would be unrealistic to expect announcements to be made about foreign legal proceedings without a listed company having promptly obtained legal advice about it. However, once such legal advice has been obtained, an announcement should be made without delay.
In short, there may be occasions when a listed company needs time to clarify the details of and the impact arising from an event, before it is in a position to issue a full announcement to inform the public. In light of this latest MMT determination, however, even if more time is required to issue a full announcement, listed companies should still consider carefully (if necessary with lawyers advising) whether there is a need to issue any timely holding announcement in the meantime.