to these bribes, subsequent land purchases, and related real estate construcnon acnvines, Evergrande has employed a Source: Evergrande filings, Citron research. Note: Evergrande reported 35bn of equity including minority interests. .. Hunan Xiongzhen Investment Co., Ltd (湖南雄震投資有限公司). . Andrew Left heads a Los Angeles-based company, Citron Research, an in- depth analytical report on Evergrande Real Estate Group Ltd, now. Evergrande Real Estate Group Limited concerning the Group in the Report. relation to a report (the ”Report”) issued by Citron Research.
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Section 1 of the Securities and Futures Ordinance SFO Section 1 of the SFO prohibits dissemination of false or misleading information about securities or futures that is likely to induce another person to trade in the securities or affect the price of the securities. The Tribunal found that Mr Left had engaged in market misconduct, contrary to s. It ruled that Evergrande had not used trust financing as a means of concealing off-balance sheet debt, rather as a means of financing the buying of land.
Citron Research had established a certain reputation for itself, with a degree of notoriety, and was therefore likely to be given attention, especially given the sensationalist language used in reporys Report.
Potentially and in one sense, s. In this regard, what could not be ignored, the Tribunal said, was that the allegations contained in the Draft were based on a supposed understanding of the relevant accounting regulations and standards, these being of some complexity, and in important respects, particular to Hong Kong.
But, citroj review of the rpeorts suggests that it is a cautious consideration of the risk that false or misleading statements about listed companies pose for investors who can be panicked into trading decisions based on the resulting false or misleading information.
Like Muddy Waters, Citron Research, run by Andrew Left from his Beverley Hills, California home, evergraned known for targeting companies with research exposing what it claims are financial irregularities. The report quickly became news internationally, being picked up by equity researchers and news services around The Tribunal said that the right of freedom of expression is not an absolute right and referred to journalists as an example. Hong Kong Market Misconduct: Potentially and in one sense, s.
The report alleged that Evergrande had used off-balance sheet joint ventures to dishonestly substantially under-report evergrahde debt. The Tribunal said that the right of freedom of expression is not an absolute right and referred to journalists as an example. Hong Kong Capital Markets Litigation.
Misleading the market: an analysis of the Citron Research case
Section 1 of the SFO prohibits dissemination of false or misleading information about securities or svergrande that is likely to induce another person to trade in the securities or affect the price of the securities. In this regard, what reql not be ignored, the Tribunal said, was that the allegations contained in the Draft were based on a supposed understanding of groip relevant accounting regulations and standards, these being of some complexity, and in important respects, particular to Hong Kong.
It ruled that whether Left was negligent would be judged by whether Left took the care that a reasonably prudent market commentator or analyst would take. The test as to knowledge was whether Mr Left knew when he published the Report that the information in question was false or misleading.
Misleading the market: an analysis of the Citron Research case | CSJ HKICS
The Tribunal had no difficulty in concluding that when Mr Left published the Report he consciously disregarded the real risk that the Report, even after his amendments, was false grou misleading as to esttae facts.
Citron was previously unknown in Hong Kong. The test in respect of negligence which is objective was in compiling and publishing the Report, did Mr Left exercise that level of care to avoid the inclusion of false or misleading information as to material facts that is realistically required of a reasonably prudent person carrying out the function of a market commentator or analyst?
He suggested this would better protect freedom of speech. Yet, Mr Left when conducting his verification exercise, chose not to take the most obvious precaution of seeking expert advice. He did not seek any expert advice on the accounting standards that applied to Evergrande or approach the company for comment first.
It can be readily appreciated that if a person who disseminated information has knowledge or is reckless, which is tantamount to knowledge in most cases as to whether the information is false or misleading as to a material fact, then he should be found liable under s. He went ahead without such advice while still retaining the sensationalist language of the Draft, language that of itself, he must have appreciated would cause a degree of consternation among members of the investing public.
Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. Comments As the Tribunal emphasised in its ruling, the purpose of s.
The Tribunal found that Mr Left had engaged in market misconduct, contrary to s. Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. View Binder — add lttd to your binder to download rwports print: On 26 Augustthe Market Misconduct Tribunal Tribunal found that Andrew Left had engaged in market misconduct, having published on a website, a false and misleading report Report regarding a company listed on the Hong Kong Stock Exchange, following which there was a substantial fall in its share price.
Counsel for Mr Left argued that negligence was not properly to be read as applying to all persons but only to those persons who, by their actions, had an existing duty and a standard of care to meet and it had to be demonstrated that the person stood in or had assumed a special relationship to the market, e.
The citrron that Mr Left had many years of experience in publishing corporate commentaries, rel specializing in hunting down corporate fraud, meant that he must have appreciated that anonymous reports of this kind making allegations of fraud, payment of bribes and other illegal dealings required careful scrutiny.