SFC reprimands and fines Ever-Long Securities Company Limited $3 million for sponsor failures

On December 27, 2024, the Securities and Futures Commission ("SFC") reprimanded and fined Ever-Long Securities Company Limited (Ever-Long) $3 million for failing to discharge its duties as the sole sponsor in the application of Coastal Corporation Limited (Coastal) in 2016 to list on the Growth Enterprise Market ("GEM") of the Stock Exchange of Hong Kong Limited ("SEHK"). At the material times, Coastal and its subsidiaries (Coastal Group) were providers of vessel chartering services based in Singapore.

The disciplinary action followed the SFC’s investigation which found that Ever-Long failed to perform proper due diligence on material issues, disclose known material issues to SEHK, and ensure the completeness of information in the Application Proof.

In January 2014, Coastal’s subsidiary changed its business model from leasing vessels to one of Coastal’s connected persons to leasing them to the top customer, an independent third party. This leasing arrangement accounted for over 50% of Coastal Group’s revenue for each of the financial years ended 30 June 2015, 2016, and 2017.

Ever-Long failed to critically assess the rationale for the leasing arrangement and ensure compliance with Singapore’s legal and regulatory requirements. It also did not conduct adequate due diligence on the operation model and deemed connected transactions, and failed to disclose the top customer’s lack of licence and associated risks until queried by SEHK.