REGULATORY ENFORCEMENT NEWSLETTER - ISSUE 1
A quarterly roundup of regulatory issues
Yorkey Optical International (Cayman) Limited (“Yorkey”)
– no profit warning, how
to comply with Part XIVA
On 28 February 2017, the MMT found that Yorkey, its CEO Nagai Michio and CFO Ng Chi Ching
had each breached their statutory obligation to disclose inside information.
The MMT concluded that Yorkey’s low turnover and
losses contained in October to December 2012’s
monthly management accounts satisfied the definition
of inside information (section 307A(1) SFO) being
specific information relating to the company, not
generally known to the public and which would
materially affect Yorkey’s share price.
Furthermore, the monthly results from July to
November were sufficiently poor to indicate to
management that 2012’s results would be much worse
When disclosure of the inside information
should have happened?
The MMT found that Mr Michio in performing his duties
as CEO of Yorkey had (or ought reasonably to have)
come to know of the company’s deterioration by mid-
January 2013 at the latest (when he had the monthly
management accounts for December and 2012 internal
accounts). At that point in time the obligation to
disclose the inside information as soon as reasonably
practicable existed and as stated above, that was
breached because the public was not informed of
Yorkey’s poor performance until 25 March 2013 (two
Mr Michio and Mr Ng, Yorkey’s officers, breached
section 307G of the SFO for failing to have taken all
In its Interim Results for the first six months of
2012 (released 16 August 2012), Yorkey’s revenue
decreased compared to the same period in 2011 by
12.1%. Net profit had also fallen by 62%.
Nonetheless Yorkey stated that it expected
significant growth and increasing profitability in the
second half of the year.
No growth or profitability followed. In fact in the
second half of 2012 Yorkey sustained material
losses and its financial performance deteriorated
No profit warning was made and Yorkey did not tell
the public that the company would not be achieving
the significant growth and increased profitability it
had stated was expected.
Yorkey announced its 2012 results on 25 March
2013 (after Part XIVA had become law) when the
a loss before tax of US$136,000 (profit before
tax was US$7.531 million in 2011); and
net profit (after tax credit) had declined by
99% from 2011. Yorkey’s revenue and
profitability had also decreased in the second
half of 2012.
Yorkey’s Share Price
In the 3 days after reporting its 2012 results,
Yorkey’s share price fell by 21.25% from HK$0.80
to HK$0.63 per share.
The SFC found:
Yorkey prepared monthly management accounts
which would be available in the middle of the
next month for review by Mr Michio;
The monthly management accounts for October,
November and December 2012 showed Yorkey
incurring significant net losses for those
In mid-January 2013, internal accounts for 2012
were available and passed to Mr Michio, so he
was aware of the company’s deteriorating
performance by then at the latest.