SGX lodges complaints against China Fibretech chairman

The SGX filed complaints against China Fibretech chairman and chief executive Wu Xinhua for alleged offences under the Chinese Penal Code.
The SGX filed complaints against China Fibretech chairman and chief executive Wu Xinhua for alleged offences under the Chinese Penal Code.PHOTO: REUTERS

SINGAPORE - The Singapore Exchange (SGX) has filed complaints with authorities here and in China against China Fibretech chairman and chief executive Wu Xinhua for alleged offences under the Chinese Penal Code.

Last September, Mr Wu directed the fabric treatment company to pay 466 million yuan (S$94.4 million) to three customers that had filed suspicious compensation claims against it.

The cash transfers were made without board approval, and in bald disregard for the SGX's earlier guidance that company boards should appoint reputable third party valuers to review the reasonableness and veracity of customer claims that are far bigger than the value of the original item subject to the claim.

In a statement on Thursday, the SGX said that its complaint was filed through lawyers appointed in both Singapore and China who have been advising SGX on the matter since 2016.

The SGX's latest move represents the first time that it is seeking cooperation from the Chinese authorities to deal with an errant S-chip, or Singapore-listed Chinese company.

Regulators around the world have generally struggled to bring Chinese companies accused of stock fraud to heel, because of limits to their jurisdiction.

Singapore, for instance, has no extradition treaty to secure the China-based accused's attendance in Singapore to face legal action, and the Commercial Affairs Department would need the help of the Chinese authorities to gather evidence in China.

But Mr Robson Lee, partner at law firm Gibson Dunn, was hopeful: "This is not a futile attempt by the SGX to try and bring a market offender based in a foreign jurisdiction to account for his breach.

"The SGX has obviously obtained definitive legal advice from Chinese lawyers and has also received clear indication from the Chinese authorities that they will respond to an official complaint lodged by the SGX through its lawyers."

China Fibretech shares have been suspended from trading since November 2015.