HK Court orders insider dealers to pay $12.9M to investors

Hong Kong’s Court of First Instance has ordered that illicit profits of insider dealing in shares of TeleEye Holdings Limited of $12,949,875 made by Ms Wei Juan and Mr Huang Yi, associates of Ms Yik Fong Fong, be paid to 63 investors.

The funds will be paid out to court appointed administrators, Mr Tsui Chi Chiu and Mr Leonard Chan King Wai of Ernst & Young Transactions Limited, and distributed to the affected investors in proportion to the number of shares they sold to Wei or Huang between 29 February and 12 April 2016.

This concludes the civil proceedings commenced by the Securities and Futures Commission (SFC). The SFC commenced these proceedings under section 213 of the Securities and Futures Ordinance and applied for interim orders freezing the profits of insider dealing on 30 September 2016. A total of $12,949,875 was paid into court by Wei and Huang.

The SFC investigation found that:

  • From late February to 12 April 2016, Yik obtained information about a proposed takeover of TeleEye when she acted as the representative of the controlling shareholder of TeleEye to negotiate with the offeror. On 14 April 2016, TeleEye announced the takeover.
  • Between 1 March and 12 April 2016 (the last trading day prior to the announcement), Yik bought TeleEye shares through three brokerage accounts held by Wei and Huang. All of these accounts were controlled by Yik as she was authorised to operate these accounts. Huang also acquired TeleEye shares through his trading account prior to the announcement of takeover. A total of 22.72 million shares were eventually acquired through these accounts.
  • After the resumption of trading on 15 April 2016, a total of 15.65 million TeleEye shares were sold from the aforesaid trading accounts between 15 April and 20 May 2016, resulting in a total profit of $12.9 million.

Yik left Hong Kong shortly after the SFC had commenced its investigation.

On 9 November 2021, the court found that Yik, Wei and Huang engaged in insider dealing in the shares of TeleEye.

The SFC’s Executive Director of Enforcement, Mr Thomas Atkinson, said:

“The broad effect of the orders will be to restore investors who transacted with Wei and Huang to their pre-transaction positions to the extent possible. The 63 investors had no means to detect they were dealing with Wei and Huang, who were engaged in insider dealing. If they had known, they would not have sold their shares to them and certainly not at the same price. This case sends a clear message that the consequences of wrongdoing, including the costs of restoration or remediation, should be met by wrongdoers and not be borne by innocent investors or the market.”

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