The SFC exercises its powers to order the suspension of trading in shares in a listed company to protect investors’ interests.

By Dominic Geiser, Truman Mak, Evangeline Tsui, and Charlotte Wong

On 15 April 2024, The Stock Exchange of Hong Kong Limited (SEHK) suspended trading in the shares of Tianyun International Holdings Limited (Company) pursuant to directions from the Securities and Futures Commission of Hong Kong (SFC). In ordering the suspension, the SFC exercised its powers under section 8(1) of the Securities and Futures (Stock Market Listing) Rules (SMLR), which empowers the SFC to make such directions to maintain an orderly and fair market and protect the investing public’s interests.


In March 2022, the Company’s then-auditors identified a major discrepancy between the Company’s internal financial records and actual bank balance based on records of the bank, which provided confirmations to the auditor. In subsequent announcements, the Company explained the discrepancy arose as a result of an unauthorised transfer of RMB34 million, which was procured by an executive (Executive) of a subsidiary of the Company (Subsidiary). The Company also disclosed that it engaged a forensic accountant to conduct an independent investigation into the purported unauthorised transaction and outlined key investigative findings.

That investigation found the Executive caused the Subsidiary to enter into a RMB34 million loan for a construction project without seeking the necessary prior approvals. The Executive was also found to have provided the Company’s auditors with forged bank confirmations and bank statements showing the Subsidiary maintained the loan amount as cash balance in its account.

SFC investigation

The SFC subsequently initiated an investigation, which is ongoing. As part of its investigation, the SFC reviewed the balance of the bank accounts belonging to the Company and its major operating subsidiaries in the period from 31 December 2019 to 30 June 2022 — which the Company provided — and compared them against the balances that the SFC obtained from the Company’s banks. The review revealed other discrepancies and the SFC identified missing funds amounting to more than 90% of the Company’s cash and balances and more than 45% of the Company’s net asset value based on its published financial results from the four previous years.

In the SFC’s view, these findings were concerning as they raised serious doubts about the accuracy of the financial information the Company disclosed, the integrity of its management, and the reliability of its internal control and accounting system for protecting its assets and keeping the market properly informed.

The SFC required the Company to take immediate action to protect shareholders’ interests. This action included suspending the individuals who were implicated, engaging reputable independent consultants to investigate the matters, replacing the Company’s board of directors, engaging independent personnel to improve the Company’s control procedures for safeguarding the Company’s assets, and disclosing to shareholders details of the SFC’s concerns and steps taken to address those concerns.

Notwithstanding the SFC’s directions, the Company failed to comply and did not take the mandated actions to alleviate the SFC’s concerns. In particular, the Company did not engage a reputable independent manager in Hong Kong to safeguard its assets. In light of these developments, the SFC ordered the suspension of dealings in the Company’s shares to protect the investing public and maintain a fair and orderly market.


In a Joint Statement on IPO-related Misconduct issued by the SFC and SEHK in May 2021, the SFC indicated that it would exercise its power to issue suspension notices under section 8(1) of the SMRL when there is evidence that IPO placees at the time of listing were not genuine investors, or if there was no sufficient genuine investors in the securities. Previously, the SFC also exercised such powers amidst suspected market manipulation of listed securities and when the prospectus and listing application of listed companies were found to contain materially false, incomplete, and misleading information. The SFC’s use of power under section 8(1) of the SMRL on this occasion reflects the SFC’s robust approach to listed company misconduct and a readiness to utilise its full range of powers and work with the SEHK to protect the integrity of the financial market and the interests of the investing public.

This case sends a strong message to listed companies that the SFC expects listed companies to implement adequate internal control systems to ensure that assets are not misused. This matter also serves as a reminder of the importance of cooperating with the SFC during an investigation, and that failure to address the SFC’s concerns and institute necessary enhancements could lead to serious repercussions.