SECURITIES AND FUTURES COMMISSION v. LIU ZHONGKUI AND OTHERS

SECURITIES AND FUTURES COMMISSION v. LIU ZHONGKUI AND OTHERS

On the agreed facts the business and affairs of the company were conducted in a manner within section 214(1); the respondent as CFO was grossly negligent in failing to detect massive overstatements of cash over multiple years, and the public protection and deterrence objectives required a longer period than the parties' agreed 2 years, therefore a 3-year disqualification order was appropriate.

Citation
[2025] HKCFI 839
Parties
Petitioner: Securities and Futures Commission; 1st Respondent: Liu ZhongKui; 2nd Respondent: Yang Ma; 3rd Respondent: Lin Supeng; 4th Respondent: Yang ShuYan; 5th Respondent: Cheung Chuen
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
25 February 2025
Case Number
HCMP314/2020
Procedural Posture
Disqualification Petition Under Section 214 Securities and Futures Ordinance (carecraft Procedure) / Hearing and Judgment (approval of Agreed Period; Court Substituted a Different Period)
Outcome
Disqualification order made against 4th Respondent (Yang) for 3 years; costs awarded to SFC with specified set-off
Legal Topics
Director Disqualification, Corporate Negligence, Financial Statement Misrepresentation, Carecraft Procedure
Source Language
EN
Company Law Securities Regulation Director Disqualification Corporate Negligence Financial Statement Misrepresentation Carecraft Procedure

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Parties

Securities and Futures Commission

Petitioner

Liu ZhongKui

1st Respondent

Yang Ma

2nd Respondent

Lin Supeng

3rd Respondent

Yang ShuYan

4th Respondent

Cheung Chuen

5th Respondent

Procedural Posture

Disqualification Petition Under Section 214 Securities and Futures Ordinance (carecraft Procedure) / Hearing and Judgment (approval of Agreed Period; Court Substituted a Different Period)

Legal Issues

  1. 1 Whether the conduct of the company’s affairs engaged one or more limbs of section 214(1) SFO
  2. 2 Whether a disqualification order should be made and for what period
  3. 3 Whether the court should adopt the parties' agreed disqualification period

Ratio Decidendi

On the agreed facts the business and affairs of the company were conducted in a manner within section 214(1); the respondent as CFO was grossly negligent in failing to detect massive overstatements of cash over multiple years, and the public protection and deterrence objectives required a longer period than the parties' agreed 2 years, therefore a 3-year disqualification order was appropriate.

Court Disposition

Disqualification order made against 4th Respondent (Yang) for 3 years; costs awarded to SFC with specified set-off

Orders

  • Disqualification order for a period of 3 years against the 4th Respondent, Yang ShuYan
  • 4th Respondent to pay the Securities and Futures Commission’s costs in these proceedings in the sum of HK$291,021, subject to a set-off of HK$65,397 agreed payable by the SFC to the 4th Respondent under an earlier order