CITRON REPORTS ON EVERGRANDE REAL ESTATE GROUP LTD PDF

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). [1]. 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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Search by Service Area. Search by first letter of last name. We use cookies to enhance your experience on our website. By continuing to use this website, you agree to the use of these cookies. 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.

The Tribunal found that he was reckless when he published the Report, having consciously disregarded the real risk that the Report was false and misleading as to material facts. This is a landmark case, being the evfrgrande 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.

Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website.

He had been prompted to do so on this occasion by the receipt of an anonymous package containing a lengthy analysis of Evergrande Draftmaking serious allegations of insolvency and fraudulent accounting. According to Mr Left, he did not take the contents of the Draft at face value and instead eliminated any information from it that could not be verified by publically available information.

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. The requisite elements that must be reall are: The Tribunal found that Mr Left had engaged in market misconduct, contrary to s.

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. He had therefore published the Cittron and thereby disseminated the information. The Tribunal evdrgrande 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 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.

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 publication.

Citron Research had evergarnde 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. 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. The allegations contained wvergrande 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 estqte document and one quite deports — even if over a limited period of time- of having an impact on the market.

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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 a material impact on the trading in Evergrande shares on the Hong Kong market. 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 Tribunal explained the tests involved in proving knowledge, recklessness or negligence and ruled in relation to each as follows.

The test as to knowledge was whether Mr Left knew when he published the Report that the information evefgrande question was false or misleading. The Tribunal found that Mr Left had been reckless in his publication of the Report.

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.

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.

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. Yet, Mr Left otd conducting his verification exercise, chose not to take the most obvious precaution of seeking expert advice. Nor did he approach Evergrande for clarification of those matters.

He went ahead without such advice while still retaining the sensationalist language of the Draft, language that of itself, he must have appreciated would cause a degree of consternation among members of the investing public. 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 estatte relationship to the market, e.

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 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?

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For the same reasons as above, the Tribunal found that Mr Left had been negligent. As the Tribunal emphasised in its reportw, the purpose of s.

Chinese developer Evergrande dives on short-seller report

It can be readily appreciated that if a person who disseminated information has knowledge or is reckless, which is tantamount to knowledge in most cases as to whether the information is false or misleading as to a material fact, then he should be found liable under s. These two cases will likely make market commentators and analysts think and write carefully and act prudently when publishing commentaries repors listed companies.

The Tribunal said that the right of freedom of expression is not an absolute lltd and referred to journalists as an example. It appears that the Tribunal was referring to the law of defamation as affecting the right of freedom of expression. Potentially and in one sense, s. It remains to be seen as to how the content and the scope of the duty of care which is owed to the market and its standard are to be developed in future cases.

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Chinese developer Evergrande dives on short-seller report | Reuters

Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. Section 1 of the Securities and Futures Ordinance SFO 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.

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. 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 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 eetate effect.

Knowledge, recklessness or negligence The Tribunal explained the tests involved in proving knowledge, recklessness or negligence and ruled in relation to each as follows.

Knowledge The test as to knowledge was whether Mr Left estaate when he published the Report that the information in question was false or misleading.

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Recklessness The test in respect of recklessness which is subjective was: 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. Comments As the Tribunal emphasised in its ruling, the purpose of s.

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