香港联合交易所有限公司
(香港交易及结算所有限公司全资附属公司)
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
IMPOSES A DIRECTOR UNSUITABILITY STATEMENT against:
(1) Mr Wang Xiaodong, former executive director;
CENSURES:
(2) Ms Chow Mun Yee, former executive director and company secretary;
(3) Mr Yang Haoying, former executive director;
(4) Mr Zhao Tong, former executive director and chief investment officer;
AND FURTHER DIRECTS:
Ms Chow, Mr Yang and Mr Zhao to attend training.
The statement made in respect of Mr Wang above is made in addition to a public censure against him. The Director Unsuitability Statement is a statement that, in the Exchange’s opinion, Mr Wang is unsuitable to occupy a position as director or within senior management of the Company or any of its subsidiaries.
This case involves a money lending business which was seriously mismanaged. During a 9-month period between July 2017 and April 2018, the Company significantly expanded its money lending business and granted loans in the total amount of $2.28 billion. All of the loans were unsecured, the majority of the borrowers were based in the PRC, and over 93 per cent of the loans were paid to third party nominees. All of the borrowers defaulted on the loans and impairment losses of over $1.9 billion were incurred by the Company.
The Exchange was concerned about the commercial rationale for granting such loans, and there was limited evidence of the due diligence which was purportedly conducted on the borrowers.
The four respondents were the executive directors responsible for or involved in the money lending business. There was no evidence to show that the expansion of the Company’s money lending business had been properly considered. Despite the sizeable amounts of the loans, the directors failed to ensure that proper due diligence and credit assessments had been conducted, failed to adequately monitor the loans after they had been made, and/or failed to act as a gatekeeper for the Company’s funds. Mr Wang further failed to respond to our enquiries.
Key messages:
Entry into or expansion of a business, particularly one which is high risk, must be properly considered by the board. For money lending, proper steps must be taken to assess and manage the exposure to the issuer, including due diligence, a thorough analysis of the risks, and ongoing oversight of the loan portfolio. Comprehensive records of all these steps must be kept.
The primary responsibility for these matters lies with the directors. They must fulfil their fiduciary duties and apply a reasonable level of skill, care and diligence. They are expected to critically assess the commercial rationale for the business, and to play an active role in safeguarding the assets of the issuer.
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