Worldwide Injunction

SFC is again showing its teeth by obtaining an interim "worldwide injunction" from the Court to freeze assets of up to HK$43m held by two individuals involved in suspected insider trading of Asia Telemedia (ATML) shares. The original application made by SFC on 16 Apr 2008 was made in chambers (not open to public). This is the third application made by the SFC since 27 Jul 2007 freezing proceeds of suspected insider trading.

So far SFC has identified approximately HK$31.2m held in the bank accounts of two individuals, "C" and "D" (the Court has suppressed their identities) as well as in the bank accounts of two BVI companies controlled by "C". These bank accounts are now frozen under the terms of the interim worldwide injunction. SFC is continuing to make inquiries to identify more assets up to HK$43.7m.

SFC's action was based on evidence and suspicions that "C" sold 100 million shares through his own and suspected nominees' accounts between 27 Apr and 30 May 2007. These transactions occurred before ATML informed the market that a winding up petition had been served on the company and that winding up proceedings had commenced.

The sum of money frozen by the injunction is the loss that appears to have been avoided by "C" in selling 100m ATML shares before news of the statutory demand and winding up petition became generally known. The injunction serves to prevent the dissipation of assets pending the finalisation of the SFC's investigation and to ensure there are sufficient assets to satisfy any financial penalty, compensation or disgorgement orders, if relevant proceedings are commenced and orders are made against "C". SFC calculated the amount of HK$43.7m by comparing the amount realised from the shares sold and the market value of the shares after the market learned and absorbed the relevant information.

"C" is a PRC resident who did not appear to be residing in HK. SFC suspected "C" had transferred most of the sales proceeds through "D" to overseas bank accounts. SFC sought the interim worldwide injunction on an ex parte basis (i.e. on the absence of notification to any of the defendants). The case returned to the High Court this morning where legal representatives appeared for "C", "D" and the two BVI companies. The Court gave directions for filing further material with the court and adjourned the hearing of the case to a date to be fixed being not less than 10 weeks from today.

SFC will not disclose any further details about the investigation, which is continuing. Let's wait and see.