Four charged by ICAC guilty of conspiracy to defraud over bonds placement of listed company

2021-9-20


Four persons, including two former senior executives of a then listed company, charged by the ICAC, were today (September 20) convicted at the District Court of conspiracy to defraud the company and its board of directors and shareholders as well as The Stock Exchange of Hong Kong Limited (SEHK) over the placement of bonds issued by the listed company.

Mak Kwong-yiu, 47, former executive director of Convoy Financial Services Holdings Limited (Convoy Financial Services); Chan Lai-yee, 49, former financial controller of Convoy Financial Services (later promoted to chief financial officer); Wong Shuk-on, 42, former manager of Convoy Financial Services; and Lee Yick-ming, 51, former general manager of Gransing Securities Co., Limited (Gransing), were convicted of one count of conspiracy to defraud, contrary to Common Law. Mak, Chan and Wong were further found guilty of another similar offence.

Deputy Judge Mr Newman Wong adjourned the case to October 9 for mitigation. The defendants were granted cash bail.

The ICAC investigation commenced upon receiving complaints in 2017 which alleged breaches of the Prevention of Bribery Ordinance and the Securities and Futures Ordinance. An operation was jointly mounted with the Securities and Futures Commission (SFC) in December 2017. Upon completion of the investigation, the ICAC sought legal advice from the Department of Justice, which advised charging the four defendants.

The court heard that at the material time, Convoy Financial Services, later renamed as Convoy Financial Holdings Limited, was listed (publicly listed Convoy) on the Main Board of the SEHK. Gransing and Convoy Investment Services Limited (CIS), which was not a subsidiary of publicly listed Convoy, both provided dealing in securities regulated activity, such as bonds placement.

Mak and two other former executive directors of publicly listed Convoy held substantial shares of CIS. The annual report of publicly listed Convoy at the material time disclosed that CIS was its connected person.

On four occasions between July 8, 2014 and January 21, 2015, publicly listed Convoy engaged Gransing as the placing agent of four bond placing exercises of the publicly listed Convoy.

The court heard that the defendants conspired together to arrange Gransing to further engage CIS as the sub-placing agent of the four exercises. One of the sub-placing letters was issued two weeks before Gransing was engaged by the publicly listed Convoy as a placing agent.

CIS subsequently received around $49.6 million as sub-placing commission from publicly listed Convoy via Gransing and $1.2 million as bonus from Gransing under the sub-placing arrangements. In fact, Gransing did not place any bonds with any investor and CIS was the actual placing agent.

The court heard that it was never disclosed to publicly listed Convoy and its board of directors and shareholders as well as the SEHK that CIS was the actual placing agent of the four bonds.

Failure of the disclosure would have deprived shareholders of publicly listed Convoy of the right to vote for or against the sub-placing arrangements, and hindered SEHK’s enforcement of the Rules Governing the Listing of Securities on the SEHK.

The SFC, SEHK and the then publicly listed Convoy have rendered full assistance to the ICAC during its investigation.

The prosecution was today represented by Acting Deputy Director of Public Prosecutions Jonathan Man, Senior Assistant Director of Public Prosecutions Alice Chan and Senior Public Prosecutor Human Lam, assisted by ICAC officers Esther Poon and Neville Wong.

An ICAC spokesperson said over the years the ICAC has strived to foster an ethical culture within the business community, and assist listed companies to enhance their corporate governance and directors’ ethics. The ICAC will continue to collaborate with relevant regulatory bodies, including the SFC, to combat corrupt and illicit activities in the financial market so as to uphold the integrity of the market, maintain a level playing field for businesses, and sustain Hong Kong’s status as an international financial centre.
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