Core Viewpoint - The Hong Kong Stock Exchange (HKEX) has criticized Fuhong Hanlin for a $117 million investment that did not align with the stated use of funds in its IPO prospectus, leading to disciplinary actions against the company and its former CEO, Liu Shigao [1][3][4]. Group 1: Disciplinary Actions - Fuhong Hanlin and Liu Shigao accepted the sanctions and directives outlined in the HKEX's disciplinary action statement without contesting the violations [2]. - Liu Shigao is required to undergo 26 hours of training on regulatory and legal issues related to compliance with listing rules before being eligible for any future directorships in listed companies [1][2]. Group 2: Investment Details - The $117 million investment was made on the first day of Fuhong Hanlin's listing on September 25, 2019, which raised a net amount of approximately $403 million [3]. - The investment was managed by Sun Hung Kai Financial, which was responsible for the IPO, and was intended to be used for clinical trials, regulatory filings, and general corporate purposes, but the HKEX deemed the actual use inconsistent with these stated purposes [3][4]. Group 3: Role of Liu Shigao - Liu Shigao, as the then CEO, approved a two-year management fee of $3.5 million to Sun Hung Kai Financial without adequately reviewing the investment management agreement or consulting the board [4]. - He was informed that the investment was low-risk and highly liquid, but failed to fulfill his responsibilities as a director by not scrutinizing the agreement [4]. Group 4: Recovery of Investment - As of the end of 2022, Fuhong Hanlin had recovered a total of $30.64 million from the initial investment, with an additional $20 million recovered in 2023, leaving $66.36 million unrecovered [7]. - The company reported a provision for impairment equal to the receivable amount from Sun Hung Kai Financial, indicating potential financial strain [8]. Group 5: Legal Proceedings - In March 2023, the investment management party initiated legal proceedings against Fuhong Hanlin, claiming violations of the investment management agreement, which led to a court order to suspend litigation in favor of arbitration [9]. - Following the announcement on September 2, 2023, Fuhong Hanlin did not provide further formal comments on the situation [9].
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