The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against chairman of Dickson Concepts (International) Limited (Dickson Concepts), Mr Dickson Poon, and Equity Advantage Limited (Equity) for alleged insider dealing in the shares of Dickson Concepts (Notes 1 and 2).
The SFC also alleges that Dickson Poon and his son Mr Dickson Pearson Guanda Poon (Pearson Poon), an executive director of Dickson Concepts, caused the company’s breach of the disclosure of inside information requirements, resulting in a seven-week delay in its disclosure.
On 20 November 2019, Paypal Holdings, Inc. (Paypal) announced on its website that it had agreed to acquire Honey Science Corporation (Honey) for approximately US$4 billion (proposed acquisition). At the material time, Dickson Concepts held 24,834,600 shares of Honey, being approximately 3.73% of Honey’s issued share capital (investment). In Dickson Concepts’ financial statements, the investment was booked as “Unlisted equity securities” under “Other Financial Assets”, without any reference to Honey.
On 9 January 2020, Dickson Concepts issued an announcement disclosing to the public, among other things, that Paypal and Honey had completed the proposed acquisition on 3 January 2020. As a result, Dickson Concepts would receive US$147,585,708, or approximately HK$1,149,545,080 in cash as proceeds from its disposal of the Investment, which would be a gain of approximately HK$928,744,921 over Dickson Concepts’ net book value of the Investment as at 30 September 2019. On 10 January 2020, the price of Dickson Concepts shares reached an intra-day high of HK$5.52 per share and closed at HK$5.00 per share, representing an increase of 33.3% from the pre-suspension close (Note 3).
The SFC alleges that while Dickson Poon was in possession of inside information about the proposed acquisition, he purchased a total of 2,756,500 shares of Dickson Concepts via the securities account of Equity between 28 November and 19 December 2019.
The SFC also alleges that Dickson Concepts failed to disclose inside information about the proposed acquisition as soon as reasonably practicable; Dickson Poon and Pearson Poon caused Dickson Concepts’ breach of the disclosure of inside information requirements, and that they failed to take all reasonable measures to ensure that proper safeguards exist to prevent such breach.
The SFC alleges that Dickson Poon and Pearson Poon, who were members of senior management of Dickson Concepts, became aware of the inside information about the proposed acquisition on 21 November 2019. However, they failed to take steps to cause the Board of Dickson Concepts to disclose the inside information to the public as soon as reasonably practicable and Dickson Concepts only issued the announcement seven weeks later on 9 January 2020 (Note 4).
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Notes:
The shares of Dickson Concepts were and are listed on the Main Board of The Stock Exchange of Hong Kong Limited.
Dickson Poon is the group executive chairman and executive director of Dickson Concepts. Equity was incorporated in the British Virgin Islands. It was an investment holding company formed under a discretionary trust that had been established by Dickson Poon.
Trading of Dickson Concepts shares was suspended on 8 January 2020. Trading resumed on 10 January 2020 after Dickson Concepts issued the announcement about the completion of the proposed acquisition.
The SFC instituted proceedings in the MMT against (i) Dickson Poon and Equity for alleged insider dealing under section 270 of the Securities and Futures Ordinance (SFO); (ii) Dickson Concepts for alleged late disclosure of inside information under section 307B of the SFO, and (iii) Dickson Poon and Pearson Poon for alleged failure to properly perform an officer’s duty under section 307G of the SFO to prevent a breach of disclosure requirement by Dickson Concepts. A copy of the SFC’s Notice of the MMT proceedings is available on the MMT’s website.
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