Debevoise & Plimpton has strengthened its litigation practice with the hiring of former Hong Kong Securities and Futures Commission (SFC) counsel Samuel Fung, who served at the regulatory body for more than three years.
In his new role, Fung will advise the firm’s clients on the full spectrum of litigation matters, including white-collar and investigations work. Drawing on his experience at the SFC, he will help guide clients through the various civil, criminal and disciplinary proceedings and investigations being conducted by the commission.
“Recently, a number of listed companies are suspected to have entered into questionable loans that were granted without reasonable commercial rationale, prior credit assessment and/or proper documentation,” Fung told China Business Law Journal. “Frequently, the questionable loans involved director misconduct and were used to provide short-term financing to other companies, or even to siphon money out of the listed company.”
Fung added that such listed companies have been one of the major focuses of enforcement work at the SFC over the past 12 months. Listed companies and their boards of directors should be aware of this issue and review their internal procedures on the use of funds to minimise their risks.
“In particular, independent non-executive directors (INEDs) should be mindful that they owe the same duties to the listed company as executive directors do,” said Fung. “Recent cases have shown that the SFC is equally prepared to take action against INEDs where appropriate. Therefore, INEDs should not simply rubber-stamp transactions proposed by the executive directors and/or senior management, but should take an active role in vetting them.”
Recently, the SFC consulted the public on a proposed reform of section 213 of the Securities and Futures Ordinance, which currently does not apply to a regulated person engaged in misconduct that does not constitute a breach of the relevant provisions.
The proposed amendment aims to put a regulated person who is found to have engaged in any misconduct under the ordinance may, in addition to facing the usual disciplinary actions, be on the receiving end of orders, such as restoration or damages orders.
“Having said that, the precise impact and effect of this proposed amendment are still not entirely clear at this stage,” Fung added. “In any event, the proposed amendment will, if implemented, be a major addition to the SFC’s arsenal for dealing with regulated person misconduct and is, therefore, something that registered persons should pay due regard to.”
