Summary: In September 2025, the Securities and Futures Commission ("SFC") fined RaffAello Capital Limited $4 million for negligent due diligence in Paprika Holdings Limited's listing. RaffAello missed red flags indicating inflated sales and failed to verify connections between Paprika and key suppliers. The SFC's investigation revealed these issues and led to a reduced fine of $4 million. The Tribunal emphasized the need for thorough due diligence and transparency in reporting.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On September 25, 2025, the Securities and Futures Commission ("SFC") reprimanded and fined RaffAello Capital Limited (RaffAello) $4 million for its failure to fulfill its obligations as a sponsor during Paprika Holdings Limited's listing application.
The investigation disclosed that RaffAello neglected to conduct thorough due diligence on Paprika and did not examine critically the accuracy and completeness of Paprika's statements.
Paprika's retail sales figures were found to be inflated, with over 80% of its revenue coming from retail stores in the fiscal years ending March 2017.
RaffAello identified irregularities in Paprika’s retail stores' transactions but failed to investigate these issues rigorously, relying on information provided by Paprika without thorough scrutiny.
RaffAello also neglected to verify the independence of Novi eBusiness Limited and API Trading Company Limited, two significant suppliers, and failed to conduct adequate due diligence, despite discovering red flags.
The Securities and Futures Commission ("SFC") and the Tribunal both determined that RaffAello should have performed more thorough due diligence and investigated the potential fabrication of sales figures, as well as the relationships between Paprika's suppliers and its founder.
The original fine proposed by the SFAT was $13 million, but it was reduced to $4 million to consider RaffAello's financial difficulties and avoid driving the company into liquidation. The Tribunal emphasized the need for sponsors to take additional due diligence when concerns arise and to document issues and resolutions thoroughly.
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