5 May 2020
The Securities and Futures Commission (SFC) has obtained a court order in the Court of First Instance requiring Shandong Molong Petroleum Machinery Company Limited (Shandong Molong) to reconstitute its audit committee and to appoint an independent external auditor to review its internal control and financial reporting procedures after the company accepted that it had falsely and substantially inflated its financial position in six results announcements.
The SFC is also seeking disqualification orders against the company’s seven current and former senior officers allegedly responsible for a scheme to inflate the company’s financial position.
The action follows an investigation into Shandong Molong’s window-dressing of key financial information, including the company’s profit, in its unaudited quarterly and half-yearly results announcements for the first three quarters of 2015 and 2016. As a result, the results announcements falsely and misleadingly portrayed a relatively healthy picture of Shandong Molong when in fact the company was suffering losses.
The SFC alleges that Shandong Molong’s business or affairs have been conducted in a manner involving defalcation, misfeasance or other misconduct, resulting in the company’s shareholders not having been given all the information as they might reasonably expect and/or being unfairly prejudicial to the company’s shareholders