MMT finds no market misconduct in CITIC publishing the no material adverse change statement

On 10 April 2017, the Market Misconduct Tribunal (“MMT”) issued its report on CITIC Limited (“CITIC”, formerly CITIC Pacific Limited), and concluded that there was no market misconduct within the meaning of section 277(1) of the Securities and Futures Ordinance (“SFO”).

On 20 October 2008, CITIC issued a profit warning announcement (“Profit Warning”) in respect of losses arising from target redemption forward contracts (“TRF contracts”) and stated that it had been aware of such exposure since 7 September 2008. This appears inconsistent with a circular published on 12 September 2008 which contained a statement that the directors were not aware of any material adverse change in the financial position of the Group since 31 December 2017.

The MMT sets out their first interpretative guidance on the meaning of “no material adverse change”:

  • The obligation to announce whether there has been any “material adverse change” under Chapter 14A of the Listing Rules is distinct from the obligation to publish “price sensitive information” under Rule 13.09 of the Listing Rules applicable then.
  • The question is whether there has been a material adverse change in the financial circumstances of the company of such deep significance that it has undermined the financial integrity of the company for an enduring period.

Read more