Former Starry Sky director faces disciplinary action after cooperation with the Hong Kong Securities and Futures Commission and HKEX.

According to the news from the Securities and Futures Commission of Hong Kong on October 23, the Securities and Futures Commission of Hong Kong and the Hong Kong Stock Exchange have taken action to discipline the former non-executive director, L Qingxing (male), and former executive director, L Zhufeng (male) (who is L Qingxing's son) of Xingyu (Holdings) Limited (Xingyu), for failing to ensure the disclosure of important information in the company's prospectus. This action was taken based on an investigation by the Securities and Futures Commission of Hong Kong, which focused on the two individuals not disclosing to XingYu's sponsor or other directors the 13 unpaid loans related to XingYu's subsidiary companies (as joint borrowers or guarantors) when XingYu went public (initial public offering) in May 2019. These loans totaled approximately RMB 49 million, which L Qingxing obtained between April 2017 and April 2019, and he was found to have received at least RMB 44 million from them. These loans were still outstanding as of August 2020 and constituted a significant financial liability, but were not disclosed in XingYu's prospectus. Additionally, after the IPO, the two individuals did not follow the Listing Rules, but instead mortgaged the properties of XingYu's subsidiaries to secure loans without the knowledge or approval of other directors or independent shareholders. L Qingxing took advantage of the loans and mortgages for his own benefit, showing that the two individuals did not manage conflicts of interest properly. This clearly violated their duty of trust and caused significant harm to investors. The case was referred to the Hong Kong Stock Exchange by the Securities and Futures Commission of Hong Kong for further action, and the investigation results (including evidence of loans, mortgages, and loan interest payments) were handed over to the Hong Kong Stock Exchange. The Hong Kong Stock Exchange subsequently took disciplinary action against the two individuals, issuing a "Statement of Harm to Investor Rights" and condemning them. The Hong Kong Stock Exchange believed that if they remained as directors of Xingyu, it would harm the interests of investors. The two individuals have resigned from their director positions in 2021 and 2023 respectively. Mr. Christopher Wilson, Executive Director of the Enforcement Division of the Securities and Futures Commission of Hong Kong, said, "The misconduct of the two individuals not only led to the issuance of a 'Statement of Harm to Investor Rights' by the Hong Kong Stock Exchange, but also raised serious questions about their suitability to continue serving as directors of the company." Mr. Wilson continued, "Applicants for listing and directors of listed companies must fulfill their duties of trust and ensure full compliance with the relevant rules and regulations enforced by the Securities and Futures Commission of Hong Kong and the Hong Kong Stock Exchange, which are crucial. The board of directors must also act with high transparency, diligence, and honesty in disclosing financial activities and information as well as managing conflicts of interest." He added, "The Securities and Futures Commission of Hong Kong is committed to working closely with the Hong Kong Stock Exchange to hold directors accountable for misconduct, protect the rights of investors, and uphold the governance standards and integrity of the Hong Kong capital market." It is reported that Xingyu's shares were listed on the Hong Kong Stock Exchange on May 16, 2019, and its listing qualification was revoked on January 26, 2024.