Introduction

In a ground-breaking enforcement action, the Securities and Futures Commission (“SFC”) announced on 16 February 2026 that it has secured a substantial settlement with Sino Wealth International Limited (“Sino Wealth”) and Clear Prosper Global Limited (“Clear Prosper”) for serious breaches of The Codes on Takeovers and Mergers and Share Buy-backs (the “Takeovers Code”). This landmark agreement not only resolves the investigation but also sets a new precedent for accountability in Hong Kong’s financial markets.

The Rules at a glance

To understand the gravity of the breaches, it’s essential to grasp the key rules involved:

·         Rule 26.1(b) – The “Mandatory Offer” Trigger: When a group of shareholders acting in concert holds less than 30% of a company’s voting rights, and any one of them buys shares that push the group’s total to 30% or more, they must make a mandatory general offer (“MGO”) to all other shareholders.

 

·         Rule 26.3 – The “Best Price” Rule: The price offered in a general offer must be at least as high as the highest price the offeror or its concert parties paid for shares in the six months leading up to the offer.

 

·         Rule 5 – The “Commitment to Proceed” Rule: Once an offer is publicly announced, the offeror must follow through unless a stated condition is explicitly not met.

The breaches: A tale of hidden connections

The SFC’s investigation peeled back the layers of a complex corporate web involving the Chow Tai Fook Nominee Limited group (“CTFN Group”) and its acquisition of the shares of fashion retailer Giordano International Limited (Stock Code: 709) (“Giordano”).

First breach

In May 2016, Best Sincere Limited (“Best Sincere”), a seemingly unrelated private company, quietly acquired 1,000,000 Giordano shares on the open market. However, the SFC uncovered that Best Sincere was actually a secret ally of the CTFN Group. Not only is Best Sincere helmed by the son of a former CTFN Group director, but the SFC also traced the very funds used for the share purchase directly back to the CTFN Group.

This covert acquisition was the smoking gun. It pushed the combined holdings of the CTFN Group and Best Sincere past the 30% threshold, triggering an immediate obligation under Rule 26.1(b) to make a MGO to all Giordano shareholders. The CTFN Group failed to do so, violating the Takeovers Code and denying shareholders the chance to sell their shares at a control premium.

Second breach

Fast forward to June 2022. Clear Prosper launched a conditional voluntary general offer (“VGO”) for Giordano, with a key condition: it would only proceed if it could secure over 50% of the company’s voting rights.

By September 2022, Clear Prosper declared the offer dead, claiming valid acceptances left them with just 46.04% — short of the 50% target. But this calculation deliberately ignored the shares held by Best Sincere and another related entity, which the SFC now formally deemed as concert parties of the CTFN Group.

When these shares were correctly factored in, the truth emerged: the concert party group actually held a commanding 55.09% of Giordano. The VGO should have been declared unconditional. By failing to do so, Clear Prosper breached Rule 5, misleading the market and effectively freezing out shareholders who had accepted the offer.

The settlement: A billion dollar remedy

In a decisive move, Sino Wealth and Clear Prosper have agreed to a landmark settlement with the SFC. Their primary obligation is to compensate the very shareholders they affected. The companies will make cash payments to those who held Giordano shares on the dates of the breaches, compensating them for the loss of opportunity they suffered. The total compensation is expected to reach a staggering HK$1.5 billion.

Why this settlement matters

This case is monumental for three key reasons:

1.        It’s a first. This is the first time the SFC has publicly announced a settlement for Takeovers Code breaches. Historically, such violations resulted in public reprimands or “cold-shoulder orders.” This settlement signals a new, more pragmatic, and restitution-focused approach by the regulator.

 

2.        It prioritises investors. The SFC emphasised that the settlement serves the public interest because it directly compensates the wronged shareholders. This demonstrates a clear shift toward securing tangible outcomes for investors rather than just issuing symbolic punishments.

 

3.        It opens a new door. The SFC acknowledged that reaching a settlement saved considerable time and the high costs of a lengthy disciplinary hearing. This sends a powerful signal to the market: cooperation and a willingness to make amends can lead to a resolution that benefits both the regulator and the parties involved.

The key takeaway: Settlement as a strategic art

For anyone facing a Takeovers Code investigation, this case serves as a powerful reminder that settlement is a viable and increasingly attractive option. Early resolution can save years of legal battles and significant costs. It also demonstrates a spirit of cooperation, which is a strong mitigating factor.

However, navigating a settlement is an art, not a science. It requires deep knowledge of the rules and, crucially, extensive experience in dealing with regulators. While accepting responsibility can lead to a quicker resolution, it also requires strategic concessions.

The message is clear: if you find yourself under scrutiny, talk to an experienced legal professional immediately. Understand your options, weigh the risks, and craft a strategy that protects your interests while navigating the complexities of the investigation.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2026