The Securities and Futures Commission is suing the chief executive of mainland company China Forestry in an attempt to freeze the proceeds of a questionable share sale he carried out just days before the company admitted its auditors had found possible accounting 'irregularities'.
China Forestry, which is one of the mainland's largest logging firms and counts American private equity giant Carlyle Group as its second-biggest investor, said auditors KPMG had queried its accounts on January 26 but did not disclose further details. The stock exchange then halted trading in its shares.
Chief executive Li Hanchun announced he was selling a 3.9 per cent stake worth HK$398.65 million in China Forestry on January 13. Standard Chartered arranged the share sale, which was completed four days later.
The SFC wants the court to freeze Li's Hong Kong assets up to the value of HK$398 million.
The securities regulator is also seeking to prevent Li from 'dealing in the listed securities of China Forestry Holdings whilst in possession of unpublished information about accounting irregularities at the company', according to its writ.
Spokesmen for China Forestry and Li could not be reached. An SFC spokesman declined to comment. A Hong Kong spokesman for Standard Chartered did not respond to an e-mail.
Li is not a well-known figure on the mainland or in Hong Kong, or a founding director of China Forestry. Just 35 years old, he joined the company in 2007.
