Hong Kong’s Securities and Futures Commission (SFC) said last week that it has reprimanded and fined Ever-Long Securities Company Limited (Ever-Long) HK$3 million for sponsor failures in a 2016 listing application by Coastal Corporation Limited (Coastal) on the Growth Enterprise Market (GEM) of the Hong Kong Stock Exchange.
Hong Kong Regulator Fines Ever-Long Securities Company Limited $3m
The SFC investigation is said to have found that Ever-Long fell short in conducting due diligence, disclosing material issues, and ensuring the accuracy of the Application Proof submitted for Coastal’s listing.
The regulator explained that key failures included neglecting to verify the rationale and legality of a leasing arrangement central to Coastal’s business model, which accounted for over 50% of the company’s revenue during the track record period.
They added that the arrangement, involving a top customer lacking proper marine licensing in Singapore, raised significant compliance and legality concerns, which then “called into question Coastal’s suitability for listing.”
Despite awareness of the risks, SFC said Ever-Long relied on representations from Coastal’s directors without independent verification and failed to address inconsistencies in legal opinions related to the business model.
In addition, the company reportedly did not disclose the top customer’s unlicensed status or other material issues to the Stock Exchange of Hong Kong until queried.
The SFC cited Ever-Long’s breach of professional standards and the need to deter similar sponsor failures as key factors in determining the penalty.
However, it acknowledged Ever-Long’s cooperation during the investigation and the absence of harm to the public, as the application was eventually withdrawn.
