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Introduction
Sir Dickson Poon, founder and former Group Executive Chairman of Dickson Concepts (International) Limited[1] (the “Company“), and his investment vehicle, Equity Advantage Limited (“Equity Advantage“), have been found by the Market Misconduct Tribunal (“MMT“) to have engaged in insider dealing through purchases of the Company’s shares while in possession of undisclosed inside information concerning a transaction that yielded approximately HK$1.15 billion in cash proceeds for the Company.
The MMT also found that the Company breached its disclosure obligations under section 307B of the Securities and Futures Ordinance (Cap. 571) (“SFO“) as a result of Sir Dickson Poon withholding the information from the board of the Company.
Background: The Undisclosed Investment and PayPal’s US$4 Billion Acquisition of Honey
The case centred on PayPal Holdings, Inc.’s approximately US$4 billion acquisition of Honey Science Corporation (“Honey”), announced in November 2019. At the time, the Company held a 3.73% equity interest in Honey, which was not publicly disclosed and appeared in the Company’s financial statements only as an “unlisted equity security” under “other financial assets”, without identifying Honey as the investee company.
Following completion of the acquisition, the Company received approximately US$147.6 million (HK$1.15 billion), generating a gain of approximately HK$928.7 million. The MMT held that information relating to the transaction was highly price-sensitive and therefore constituted inside information under the SFO.
Insider Dealing and Failure to Inform the Board
Although Sir Dickson Poon became aware of the proposed acquisition in November 2019, the information was not communicated to the board or senior management of the Company until late December 2019 and was not disclosed to the market until January 2020.
Following the expiry of the Company’s routine results blackout period on 28 November 2019, Sir Dickson Poon acquired shares in the Company through Equity Advantage. Between 28 November and 19 December 2019, he purchased a total of 2,756,500 shares over 13 trading days while in possession of the undisclosed inside information.
Trading in the Company’s shares was suspended on 8 January 2020 pending an announcement regarding completion of the Honey acquisition and resumed two days later. Upon resumption of trading, the share price rose sharply and closed at HK$5.00, representing a 33.3% increase from its pre-suspension closing price.
While the MMT found that the Company’s breach of its disclosure obligations under section 307B of the SFO was directly attributable to Sir Dickson Poon’s decision to withhold the information from the board, the MMT did not find Pearson Poon, a director of the Company and Sir Dickson Poon’s son, liable for the disclosure breach. It concluded that Pearson Poon had acted reasonably in relying on Sir Dickson Poon and other members of senior management to assess the significance of the information and determine whether disclosure was required.
The MMT will determine sanctions and consequential orders against Sir Dickson Poon, Equity Advantage and the Company at a later hearing.
Key Takeaways
The decision provides important guidance on insider dealing, corporate disclosure obligations and the responsibilities of directors of listed issuers.
The expiry of a routine trading blackout period under the HKEX Listing Rules does not provide a defence to insider dealing under section 270 of the SFO. Directors and other connected persons remain prohibited from dealing in a listed issuer’s securities while in possession of undisclosed inside information, regardless of whether trading is otherwise permitted under the issuer’s internal dealing policies or the Listing Rules.
The case illustrates that inside information known to an officer in the course of performing his or her duties may be attributed to the listed issuer for the purposes of Part XIVA of the SFO. A controlling shareholder, founder or chairman cannot avoid disclosure obligations by withholding material information from fellow directors. Such conduct may expose not only the individual concerned to liability, but also place the listed issuer in breach of its statutory disclosure obligations.
The decision also sheds light on the operation of section 307G of the SFO. A director who neither trades on inside information nor participates in a decision to withhold disclosure may avoid personal liability where he or she reasonably relies on more senior colleagues or professional advisers to assess the significance of the information and oversee the disclosure process. Whether such reliance is reasonable will, however, depend on the circumstances of each case.
In this case, the Company’s investment in Honey was recorded merely as an “unlisted equity security” under “other financial assets”, without identifying the investee. As a result, the market had no visibility of the Company’s exposure to Honey or the potential value of that investment. By contrast, Sir Dickson Poon, having knowledge of the identity of the investee and its prospects, was in a far better position to assess the true value of the Company’s shares than ordinary investors.
The case highlights the need for listed issuers to consider carefully whether generic or aggregated disclosure of material investments in periodic financial reports may leave insiders with a continuing informational advantage over shareholders.
A genuine commercial rationale for trading is unlikely, on its own, to excuse dealing while in possession of inside information.
In some other major markets, a defendant’s stated commercial motive for trading is largely irrelevant once it is shown that they possessed inside information at the time. Hong Kong’s own case law has moved firmly in this direction. In Securities and Futures Commission v Yiu Hoi Ying Charles and Others (2018) 21 HKCFAR 475, the Court of Final Appeal narrowed the scope of the “innocent purpose” defence under section 271(3) of the SFO, holding that a defendant “uses” price-sensitive information whenever their decision to deal is made because of a market price they know to be distorted by that undisclosed information, regardless of any other commercial motive for the trade.
The MMT’s rejection of Sir Dickson Poon’s evidence that he was trading as a controlling shareholder to increase his stake in an undervalued company, rather than because of the Honey information, is consistent with this narrower, more demanding standard, and suggests that a stated commercial rationale will rarely, on its own, excuse dealing while in possession of undisclosed inside information.
For further details, please refer to the Securities and Futures Commission’s press release dated 15 October 2024 and its Enforcement News dated 31 July 2026.
[1] The shares of Dickson Concepts (International) Limited (stock code: 0113) are listed on the Main Board of The Stock Exchange of Hong Kong Limited.