Value Partners Limited, a Hong Kong-based boutique fund manager known for its high-powered returns on China-related funds and hedge funds, has pleaded guilty to failing to comply with disclosure laws and was fined.
Magistrate Johnny Chan of Hong Kong's Eastern Magistrate fined the firm HK$16,000 ($2,060) and ordered it to pay investigation costs of HK$29,225 to the Securities and Futures Commission (SFC).
According to an SFC press release: "The SFC noted that the contravention stemmed from a calculation error on the part of Value Partners Limited. The SFC regards this as the end of the matter and has warned Value Partners Limited about its obligations as a licensee to have adequate systems to comply with the law and regulations."
The fund house pleaded guilty to four summonses based on trades made in April 2002, when it failed to disclose acquiring an interest of 10.78% of the fund's total assets under management in Bright International Group Limited. It also didn't disclose its decrease of this interest in Bright stock the following week.
SFC regulations require shareholders to disclose to the listed company and to Hong Kong Exchanges and Clearing within five days of obtaining a 'substantial' holding, 10% of their total assets.
A statement by Value Partners says shortly after the firm acquired its enlarged stake in Bright, the company issued more shares and Value Partners mistakenly used the larger capital base to calculate its position.
"Value Partners is fully committed to complying with all applicable laws and regulations, in Hong Kong and elsewhere," says the firm. "Following the discovery of the mistake, Value Partners took immediate preventative measures to strengthen further its compliance system so as to ensure that no breach will occur in the future, not even a one-off, inadvertent breach like the one in question."
The firm was established in 1993 by CIO and chairman Cheah Cheng-hye, who runs fund management activities, and V-Nee Yeh, managing director of private equity operations. Yeh is also a council member at HKEx and its listing committee, as well as on the mergers and takeovers committee at the SFC. Two American investors, private equity firm Holding Capital and hedge fund manager Whitney & Co., also own stakes in Value Partners.