Securities and Futures Commission of Hong Kong

CES Capital(Hong Kong) Co., Ltd. was reprimanded by the Securities and Futures Commission and fined 3.2 million yuan for deficiencies in the management of private equity fundsJune 27, 2022 The Securities and Futures Commission (SFC) reprimanded CES Capital (Hong Kong) Co., Ltd. (Dongjin Hong Kong) and imposed a fine of 3.2 million yuan, because Dongjin Hong Kong failed to perform its due duties when it served as the investment manager of two funds from February 2015 to July 2017 (Note 1) . Two funds managed by Tokin Hong Kong invested most of their assets in two underlying companies incorporated in the Cayman Islands (Notes 2 to 5). The SFC found that Dongjin HK did not conduct adequate due diligence and monitoring of the Fund's underlying investments and take satisfactory risk management measures to identify, quantify and manage the risks faced by the Fund. Tokin HK also failed to maintain a proper audit trail of the due diligence and monitoring it purportedly conducted on the Fund and its related investments. Specifically, the SFC found that during the Relevant Period: while Tokin HK was responsible for managing and investing the assets and investment portfolios of the Funds at its discretion, it failed to do so. Instead, it is up to the directors of the fund to decide when to invest in the fund. Dongjin HK believes that its primary role is to ensure that the assets of the fund are primarily invested in target companies in accordance with the investment objective set out in the fund's private placement memorandum; , investment portfolio and liabilities, as well as the valuation basis, with limited or no knowledge; Dongjin Hong Kong claimed to hold regular meetings with its internal asset management department to review the performance of the fund, but failed to produce any meeting minutes, and Dongjin Hong Kong in Monthly reports prepared between May 2016 and March 2017 contained only some data and/or general market views, but did not provide any information on how such data and/or views would affect the subject companies and/or the funds any analysis or clarification; and Tokin HK claimed to have had discussions with the fund directors in about mid-December 2016 regarding the sharp drop in the price of one of the funds but kept no records of such discussions and the basis for its decision not to take further action (Note 6). In deciding to impose the above sanctions, the SFC has taken into account all relevant circumstances, including: Tokin Hong Kong’s remedial actions taken after July 2017 following the SFC’s limited review of its business activities, including by 2018 Since February 1, 2009, the directors of these funds have terminated the investment management services of these funds because the directors of these funds failed to provide the information Dongjin Hong Kong needs to perform their duties; and Dongjin Hong Kong has cooperated with the SFC to address the concerns of the SFC matter. End Remarks: Dongjin Hong Kong is licensed under the Securities and Futures Ordinance to operate Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 3 (leveraged foreign exchange trading), Type 4 (offering in securities) advice), Type 5 (advising on futures contracts) and Type 9 (asset management) regulated activities. Tokin Hong Kong has ceased operations for regulated activities. The two funds are hong kong investment fund sp (hkifsp) and evergreen growth saver sp (egssp, formerly known as real estate and finance fund sp). The above two funds are independent asset portfolios under worldwide opportunities funds spc (wof), and wof is an open-end investment fund established as an exempted joint stock company under the laws of the Cayman Islands. Wof was wound up on May 16, 2019 pursuant to an order of the Grand Court of the Cayman Islands. Since then, the two funds have been in liquidation. Dongjin Hong Kong was appointed by wof as the investment manager of hkifsp from March 1, 2016 to January 31, 2018 and egssp from February 16, 2015 to January 31, 2018. According to the funds' respective private placement memorandums, their investment objective is to provide shareholders with structured investment returns by investing a substantial portion of their assets in acquiring shares of target companies. The "real estate and finance fund" incorporated in the Cayman Islands was originally the target company of both hkifsp and egssp. On March 11, 2016, the directors of wof passed a resolution to change the target company of egssp to "evergreen growth saver", a company also incorporated in the Cayman Islands. The net asset value per share of egssp dropped from 2,251.987 yuan on September 30, 2016 to 546.872 yuan on November 30, 2016, a drop of 75.7%. The disciplinary action statement is available on the SFC website Last updated on 27 June 2022