The Securities and Futures Commission and the Stock Exchange of Hong Kong have taken enforcement actions against FINGERTANGO (06860) and its former directors.

On January 16, the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange cooperated in a joint enforcement action, allowing the Hong Kong Stock Exchange to take disciplinary action against FINGERTANGO Holdings Limited and its eight former directors for misconduct and breaching their duties to FINGERTANGO and its subsidiaries. The SFC is also seeking court orders to disqualify and compensate them for the alleged misconduct. The investigation focused on the problematic investments made by the directors and improper loans extended to external parties. Most of these loans have defaulted, resulting in losses of over HKD 660 million for FINGERTANGO and its subsidiaries. In light of this, the SFC initiated legal proceedings in October 2023 seeking court orders against FINGERTANGO and its eight former directors, including disqualification and compensation orders. Shortly after FINGERTANGO's listing in July 2018, the board, including non-executive directors, adopted a policy that allowed certain investment decisions to bypass board approval. Without board knowledge, FINGERTANGO used the proceeds from its IPO to invest HKD 450 million in a fund. In December 2019, part of this investment was redeemed, and another HKD 250 million was invested in promissory notes issued by a small private company. The SFC later discovered that FINGERTANGO suffered losses of HKD 258.75 million (including accrued interest) due to default on the promissory notes. Subsequently, the SFC found that between May 2020 and March 2021, FINGERTANGO and its two subsidiaries entered into 20 loan agreements with 15 borrowers totaling over HKD 500 million (2020-21 loans). FINGERTANGO incurred impairment losses of approximately HKD 424 million, with over 80% of the 2020-21 loans defaulting. Therefore, in November 2024, the SFC expanded its legal action to include the 2020-21 loans, specifically focusing on the former directors' failure to follow proper procedures and due diligence before entering into these loans. Additionally, the two subsidiaries of FINGERTANGO have been named as respondents in the legal proceedings. The losses incurred from the promissory notes in 2019 and the 2020-21 loans are attributed to the former directors Liu Jie, Wang, Liu Zhanxi, Zhu, Guo, and/or Yao for breaching their responsibilities to FINGERTANGO. As a result, they are legally liable to compensate for the losses suffered by FINGERTANGO and its subsidiaries. Mr. Christopher Wilson, the Director of Enforcement at the SFC, stated, "Company directors, including independent non-executive directors, are responsible for corporate governance, have a duty to oversee management activities, and ensure the establishment of adequate internal control policies and procedures and their effective implementation. Adopting a lax policy that exempts directors from supervising significant decisions cannot be an excuse to evade directorial responsibilities. Actively supervising these individuals helps to reinforce management's commitment to promoting an integrity culture and ethical values throughout the company." "This joint enforcement action demonstrates the strategic cooperation between the SFC and the Stock Exchange, achieving effective regulatory results. As guardians of the Hong Kong capital market, our common mission is to maintain market integrity and investor confidence and strive to achieve more efficient regulatory outcomes." In a joint statement issued in July 2023 with the Hong Kong Financial Reporting Council, the SFC reiterated the importance of proper financial activities by listed companies, especially when extending loans. The SFC emphasized that the board of directors and their audit committees should understand their responsibility to prevent asset losses or improper use within listed companies.