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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Share Facebook Twitter Linked In. Comments As the Tribunal emphasised in its ruling, the purpose of s. By GMT, Evergrande shares were down View Binder — add content to your binder to download and print: 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 explained the tests involved in proving knowledge, recklessness or negligence and ruled in relation to each as follows. Citron Research had an easily ascertainable, somewhat unnerving, reputation, the Tribunal said, and the Report was a substantial document, filled with data, graphs, lists and the like.
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.
Chinese developer Evergrande dives on short-seller report
In the report, Citron said Evergrande was a good opportunity to short sell and that Citron might hold a short position. The report alleged that Evergrande had used off-balance sheet joint ventures to dishonestly substantially under-report its debt. Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. On 26 Augustthe Market Misconduct Tribunal Tribunal found that Andrew Left had estahe 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.
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He suggested this would better protect freedom of speech. Keep up the good work, it’s most appreciated!. The Tribunal said that the right of freedom of expression is not an absolute right and referred to journalists as an example.
The Tribunal found that Mr Left had engaged in market misconduct, contrary to s. Citron Research evergrznde an easily ascertainable, somewhat unnerving, reputation, the Tribunal said, and citorn Report was a substantial document, filled with data, graphs, lists and the like. Citron was previously unknown in Hong Kong. Negligence Counsel for Mr Left argued that negligence was not properly to be read as applying to all persons but only geal 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.
Hong Kong October 27 For the same reasons as above, the Tribunal found that Mr Left had been negligent.
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.
Register now for everbrande free, tailored, daily legal newsfeed service. These two cases will likely make market commentators and analysts think and onn carefully and act prudently when publishing commentaries against listed companies.
Like Estatd 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.
This is a landmark case, being the first time the Securities and Futures Commission has taken action in respect of short seller reports and stock commentaries and the first decision of the Tribunal on the relevant provision. Did he nevertheless, although aware of a and b above, go ahead and publish it?
On 26 Augustthe MMT issued its report finding that Left had engaged in market misconduct within Section in that:. Knowledge, recklessness or repors The Tribunal explained the tests involved in proving knowledge, recklessness or negligence and ruled in relation to each as follows. The fact that Mr Left had many years of experience in publishing corporate commentaries, seemingly 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.
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. Please contact customerservices lexology.
Chinese developer Evergrande dives on short-seller report | Reuters
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? The Tribunal made it clear that the test was a predictive, objective ccitron, namely the Tribunal was required to ask itself not whether the posting of the Report on the Internet did estatee an impact on the Hong Kong market by inducing the sale or purchase of Evergrande shares, but instead was required 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.
Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. Left reviewed the material, deleted publicly non-verifiable information using the internet and company filings, updated the numerical information and published it as his report. The test as to knowledge was whether Mr Left knew when he published the Report that the information in question was false or misleading.
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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 evergranse material impact on evergrwnde trading in Evergrande shares on the Hong Kong market. The report quickly became news internationally, being picked up by equity researchers and news services around It also rejected that the MMT erred in finding that Left must have known that his allegations required accounting expertise.
Recklessness The test in respect of recklessness which is subjective was: 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. Previous Item Next Item. 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.
Evergrande, the second-largest mainland China developer by sales, has grown aggressively using debt to fund land purchases, though its acquisitions have slowed this year.
It appears that the Tribunal was referring to the law of defamation as affecting the right of freedom of expression.
He did not seek any expert advice on the accounting standards that applied to Evergrande or approach the company for comment first.