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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Left further argued that it was enough to avoid negligence for an outsider like a short-selling stock commentator who relies on public information and has no special relationship like a company insider or licensed analyst to make clear they rely on public information and set out that public information.
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. The MMT again rejected this argument for the same reason. 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?
For the same reasons as above, the Tribunal found that Mr Left had been negligent.
Recklessness The test in respect of recklessness which is subjective was: Its share price was relatively stable from April to June 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.
This was its first report on a Hong Kong listed company. Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. The Tribunal found that Mr Left had been reckless in his publication of the Report. Like Muddy Waters, Citron Research, run by Andrew Left from his Beverley Hills, California home, is known for targeting companies with research exposing what it claims are financial irregularities.
Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. 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 and misleading as to material facts. Yet, Mr Left when conducting his verification exercise, chose not to take the most obvious precaution of seeking expert advice.
Left also argued that negligence should be judged differently for those who did not have a special relationship to the market by being company insiders or analysts, as people outside these categories assumed no duty of care to the market.
The report quickly became news internationally, being picked up by equity researchers and news services around Search by first letter of last name. The test as to knowledge was whether Mr Left knew when he published the Report that the information in question was false or misleading.
Potentially and in one sense, s. Republication or redistribution of Reuters content, including by caching, framing, or similar means, is expressly prohibited without the prior written consent of Reuters. The Tribunal rejected such an interpretation and held that the section imposes a duty of care on all persons who choose to disseminate information that is likely to have an impact on the market and the duty of care is owed to the market. The Tribunal concluded that, even without any form of promotion, it was likely – indeed almost inevitable – that the Report would have become known to the Hong Kong market within a very short time of its citton.
Citron Research issued the report.
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When Mr Left published the Report, was he aware of the risk that the information in question was false or misleading? 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 the Report.
The Tribunal agreed with the SFC and ruled that the only information available to Mr Left was information in the public domain which was the information he used as the basis for the Report. The Hang Seng Index only fell 1.
Nor did he approach Evergrande for clarification of those matters.
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Likely effect on the market The Tribunal made it clear that the test was a predictive, objective test, namely the Tribunal was required to ask itself not whether the posting of the Report on the Internet did have an impact on the Hong Kong market by inducing the sale or purchase of Evergrande shares, but instead was estatee to determine whether, having regard to all relevant factors, it was probable at the time when the Report was posted that it would have such an effect.
Deacons – Peter So. The MMT imposed on Left orders that:. By continuing to use this website, you agree to the use of these cookies. The Tribunal found that he was reckless when he eveggrande the Report, having consciously disregarded the real risk that the Report was false and misleading as to material facts.
On 26 Augustthe Market Misconduct Tribunal Tribunal found that Andrew Left had engaged in market misconduct, having published on a website, a false gtoup misleading report Report regarding a company listed on the Hong Kong Stock Exchange, following which there was a substantial fall in its share price. Knowledge The test as to knowledge was whether Mr Left knew when he published the Report that the information in question was false or misleading. The allegations contained in it were direct and combative and of utmost seriousness and, whether on more careful analysis, it proved to have no substance, it must on any initial reading have been a disturbing document and one quite capable — even if over a limited period of time- of having an impact on the market.
Negligence 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.
Dissemination of information There was no dispute that Mr Left headed the research team who prepared the Report and had authorized its dissemination on the Internet, by giving the relevant instructions. Follow Please login to follow content. The Tribunal found that Mr Left had engaged in market misconduct, contrary to s.
Accordingly, the Tribunal had no difficulty in determining that the Report, when posted on the Internet, was very likely, within a matter of a few hours, to have a material impact on citroj trading in Evergrande shares on the Hong Kong market.
Please contact customerservices lexology. On 21 JuneEvergrande was the subject of a report issued on the internet at sometime in the morning Hong Kong time.
Misleading the market: an analysis of the Citron Research case | CSJ HKICS
Keep up the good work, it’s most appreciated!. Hong Kong October 27 By GMT, Evergrande shares were down Register now for your free, tailored, daily legal newsfeed service. Left short sold Evergrande shares from 6 to 19 June.
Section 1 of the SFO prohibits dissemination of false or misleading information about securities or futures that is likely to induce another person to reporhs in the securities or affect the price of the securities.