The Securities and Futures Commission (SFC) has obtained a court order that the former financial controller of Anxin-China Holdings Limited (Anxin), Ms Yang Shuyan, be disqualified from being a director, liquidator, receiver or manager of the property or business, and being involved in the management, of any listed or unlisted corporation in Hong Kong without leave of the court, for a period of three years (Notes 1 and 2).
The Court of First Instance made the order after Yang admitted to have failed to discharge her duties as Anxin’s financial controller with due and reasonable skill, care and diligence and to carry out her duties to the requisite standard in ascertaining the company’s financial position.
She also admitted that she was negligent as a member of the special team formed to investigate into the discrepancies identified by the company’s then auditors in relation to the company’s banking records and its management accounts.
The SFC’s investigation found that Anxin grossly overstated its cash position between 2011 and 2015. In particular, the company’s cash position in the audited consolidated financial statements for the two years ending 31 December 2012 and 2013 were overstated by $1.26 billion and $1.73 billion, respectively. To cover up the overstated cash position, Anxin provided false bank records to its then auditors when they carried out an audit in 2014.
Yang was responsible for overseeing the audit and preparing the company’s financial statements. As such, she was required to have a detailed understanding of its financial condition, including the company’s cash reserves. However, she failed to take reasonable steps which would have enabled her to realise that the company’s cash position between 2011 and 2015 had been overstated. She also failed to take steps to verify the purported findings of the special team regarding the discrepancies between the company’s banking records and its management accounts. Instead, she accepted its findings at face value. Yang also did not take steps to voice out her concerns regarding the company’s cash flow and the bank records provided to the independent forensic investigator appointed by the company, and her suspicions about the integrity of senior management during her tenure.
The Court remarked that Yang’s negligence “is nothing short of breath-taking” and that irregularities of such scale could not have been possible without Yang being grossly negligent.
The SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “The role of financial controllers in listed companies is pivotal to ensuring the integrity of financial reporting. Professional scepticism is not just a best practice; it is an essential duty. Financial controllers must approach their responsibilities with a critical mindset, actively questioning and verifying financial information to protect stakeholders.”
End
Notes:
The SFC obtained a court order on 24 June 2021 to disqualify a former executive director of Anxin for eight years as part of its proceedings against former senior management of Anxin. Please see the SFC’s press release dated 13 July 2021.
The judgment dated 25 February 2025 is available on the Judiciary’s website (Case number: HCMP314/2020).
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