SFC Penalizes Changjiang Corporate Finance for Serious Failings in Listing Applications

The Securities and Futures Commission (SFC) has imposed a fine of $20 million on Changjiang Corporate Finance (HK) Limited (CJCF) for not meeting its responsibilities during six listing applications.

Summary of the Issue:

Between September 2015 and December 2017, CJCF submitted listing applications for six companies: Pacific Infinity Resources Holdings Limited, AsiaPac Net Media Holdings Limited, Perpetual Power Holdings Limited, Van Chuam International (Cayman) Limited, Rising Sun Construction Holdings Limited, and Byleasing Holdings Limited. The SFC's in-depth investigation revealed that CJCF:

• Didn't thoroughly conduct due diligence for several applications.

• Didn't provide proper guidance to some companies regarding listing qualifications.

• Failed to disclose crucial details in the Application Proof prospectuses for multiple companies.

• Didn't maintain accurate records of their due diligence efforts.

Additionally, CJCFs license has been partly suspended. For a year from 18 August 2023, they can't act as a sponsor for listing applications. This ban will be lifted either after the given period or once the SFC is convinced that CJCF has improved its internal processes.

Specific Failings:

1. Pacific Infinity: CJCF did not assess significant legislative changes in the Philippines, which posed a threat to Pacific Infinity's business. They also failed to disclose this information in the companys Application Proof prospectus.

2. AsiaPac: The company heavily relied on supplier discounts. CJCF failed to guide AsiaPac to disclose essential details about these discounts and their pricing strategy.

3. Perpetual Power: Despite the company not having the necessary certifications for two of its three hydropower plants, CJCF advised them to submit their listing application.

4. Van Chuam: CJCF did not conduct due diligence on the company's debt restructuring agreements and failed to provide essential information in the prospectus.

5. Rising Sun: CJCF did not verify the reasons behind the company's prolonged credit period and its potential impact.

6. Byleasing: CJCF gave poor advice about the track record period, leading to the SEHK returning the listing application.

Furthermore, the SFC found that CJCF didn't have proper records detailing the due diligence they claimed to have done for these listing applications. This careless behavior meant that the reliability of the information from the listing companies couldn't be confirmed.

Conclusion:

The SFC believes that CJCF's conduct was significantly below the expected standard for a sponsor. The penalty considers CJCF‘s extensive and grave deficiencies, the need for a deterrent for the industry, and CJCF’s financial situation. However, CJCFs cooperation in resolving the SFC's concerns and their clean disciplinary record were also noted.

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