SFC takes action against suspected IPO-rigging syndicates and suspends dealings in Baicha shares

Regulatory Enforcement Action and Trading Suspension

On October 13, 2026, the Securities and Futures Commission ("SFC") commenced enforcement proceedings against two groups suspected of participating in fraudulent schemes designed to manufacture a false or artificial appearance of demand for shares in initial public offerings ("IPOs"). Concurrently with these actions, the SFC directed The Stock Exchange of Hong Kong Limited ("SEHK") to suspend dealings in the shares of Sichuan Baicha Baidao Industrial Co., Ltd. (“Baicha”; Stock Code: 02555), pursuant to section 8(1) of the Securities and Futures (Stock Market Listing) Rules ("SMLR"), with effect from 9:00 a.m. on that day. The SFC articulated serious concerns that Baicha's IPO may have been manipulated to project an artificial impression of market demand, and determined that such suspension was necessary or expedient for the maintenance of an orderly and fair market in Baicha's shares and for the protection of the investing public pending the conclusion of its ongoing investigation.

First Suspected Syndicate – Restriction Notices Issued to Six Brokers

In respect of the first suspected syndicate, the SFC issued restriction notices to six brokers prohibiting them from dealing with or processing assets aggregating up to $4,379,463,215 held in client accounts standing in the names of Ms Sun Ran and eight affiliated companies: Avant Team Limited; Citadel Wealth Limited; Fortuna Capital Management Limited; Gemstone Capital Management Limited (being distinct from any Hong Kong corporation licensed by the SFC); Generations Capital Management Limited; Panda Capital Management Limited; Prudent Wealth Global Inc; and Timeless Capital Management Limited (collectively, the “Nine Entities”). The amount preserved represents the largest of its kind in the history of the SFC. This syndicate was suspected of involvement in fraudulent schemes relating to the IPOs of Cloudbreak Pharma Inc. (“Cloudbreak”) and Baicha.

Second Suspected Syndicate – Restriction Notices Issued to 29 Brokers

In respect of the second suspected syndicate, the SFC issued restriction notices to twenty-nine brokers prohibiting them from dealing with or processing assets aggregating up to $285,030,265 held in client accounts standing in the names of Mr Liu Haoran; The Reynold Lemkins Group (Asia) Limited; and Kaufmann & Company Pan-Asia Limited (collectively, the “Three Entities”). This syndicate was suspected of involvement in a fraudulent scheme relating to the IPO of Tianju Dihe (Suzhou) Technology Co., Ltd. (“Tianju Dihe”).

Nature and Mechanism of the Alleged Fraudulent Schemes

The suspected syndicates were alleged to have participated in fraudulent schemes whereby portions of IPO proceeds may have been transferred out of listed companies for purported investments in financial products pursuant to undisclosed agreements between such companies and the respective syndicates. The effect, it was suspected, was that IPO proceeds could be secretly channelled back to major IPO placees or their connected parties. It is noted that the brokers who received the restriction notices were not themselves subjects of the SFC's investigations, nor did the notices impose any adverse consequences upon those brokers or their other clients.

Prohibitions Imposed and Procedural Obligations

The restriction notices prohibited the relevant brokers, absent prior written consent from the SFC: (a) disposing of or dealing with, or assisting, counselling, or procuring another person to dispose of or deal with, the relevant assets in any manner; and (b) executing any instructions given directly or indirectly by the Nine Entities or the Three Entities. In addition, each affected broker was required to notify the SFC immediately upon receipt of any instruction concerning the prohibited assets. The SFC considered the issuance of these notices desirable both in the interest of the investing public and in the broader public interest, further noting that parties involved may be ordered at a later stage to compensate affected investors through an available restitution process.

Statements by SFC Leadership

Ms Julia Leung, Chief Executive Officer of the SFC, stated: “Market integrity is the bedrock of fair capital markets and true investor confidence. We maintain a zero-tolerance policy toward any form of IPO rigging, price manipulation, or the creation of a false market.” She further affirmed that the SFC's regulatory actions are highly focused and proportionate in practice, expressing commitment to fostering an environment conducive to nurturing a virtuous cycle of sustainable market developments. Mr Michael Duignan, Executive Director of Enforcement at the SFC, stated: “We believe that the actions taken to date have significantly disrupted two suspected syndicates which may have been involved in IPO-rigging cases. By suspending dealings in Baicha and preserving assets linked to the suspected schemes, we are acting decisively to protect investors and uphold the integrity of Hong Kong's markets.” He added that these actions were also intended to enhance confidence in the fairness and integrity of Hong Kong's IPO market. The SFC confirmed that its investigations remained ongoing and would not provide further comment while they continued.

Supplementary Legal and Factual Notes

The following supplementary notes are recorded for completeness: (1) Under section 8(1) of the SMLR, the SFC possesses the power to direct SEHK to suspend dealings in shares where materially false, incomplete or misleading information has been included in documents issued in connection with a listing; where suspension is necessary or expedient to maintain an orderly and fair market; where it serves the interest of the investing public or the general protection of investors; or where there has been non-compliance with conditions imposed by the SFC's board for resumption of trading under section 9(3)(c) of the SMLR. (2) Baicha had been listed on the Main Board of SEHK since 23 April 2024. (3) Cloudbreak Pharma Inc. had been listed on the Main Board of SEHK since 3 July 2025, and dealings in its shares were suspended by SFC direction to SEHK effective 10 September 2026. (4) The restriction notices were issued pursuant to sections 204 and 205 of the Securities and Futures Ordinance ("SFO"). (5) Ms Sun Ran was a licensed representative of Harvest Global Capital Investments Limited, a corporation licensed under the SFO for Type 1, 4 and 9 regulated activities. (6) Citadel Wealth Limited; Fortuna Capital Management Limited; Gemstone Capital Management Limited; Generations Capital Management Limited; Panda Capital Management Limited; and Prudent Wealth Global Inc were incorporated in the British Virgin Islands; Avant Team Limited was incorporated in the Republic of Seychelles; and Timeless Capital Management Limited was incorporated in the Independent State of Samoa. (7) The six brokers subject to restriction notices relating to the first syndicate were: China International Capital Corporation Hong Kong Securities Limited; CMB International Securities Limited; Futu Securities International (Hong Kong) Limited; Haitong International Securities Company Limited; Harvest Global Capital Investments Limited; and Valuable Capital Limited. (8) The Reynold Lemkins Group (Asia) Limited and Kaufmann & Company Pan-Asia Limited were both incorporated in Hong Kong. (9) Tianju Dihe had been listed on the Main Board of SEHK since 28 June 2024, with dealings suspended since 1 April 2025. (10) The twenty-nine brokers subject to restriction notices relating to the second syndicate were: Aristo Securities Limited; Cheer Union Securities Limited; China Galaxy International Securities (Hong Kong) Co., Limited; China International Capital Corporation Hong Kong Securities Limited; China Securities (International) Brokerage Company Limited; CITIC Securities Brokerage ("HK") Limited; CMB International Securities Limited; Funde Securities Limited; Futu Securities International (Hong Kong) Limited; Get Nice Securities Limited; Grand China Securities Limited; Guosen Securities ("HK") Brokerage Company Limited; Huatai Financial Holdings (Hong Kong) Limited; Orient Securities (Hong Kong) Limited; Patrons Securities Limited; Phillip Securities (Hong Kong) Limited; Ping An Securities (Hong Kong) Company Limited; Quam Securities Limited; Rifa Securities Limited; Ruibang Securities Limited; SBI China Capital Financial Services Limited; SDIC Securities (Hong Kong) Limited; Sunhigh Financial Holdings Limited; Tiger Brokers ("HK") Global Limited; TradeGo Markets Limited; uSmart Securities Limited; Valuable Capital Limited; Yunfeng Securities Limited; and Zhongtai International Securities Limited.