The Hong Kong Securities and Futures Commission has reprimanded and fined RaffAello Capital Limited HKD 4 million for failing to discharge its duties as sponsor on Paprika Holdings Limited’s listing application, after the Securities and Futures Appeals Tribunal upheld the SFC’s disciplinary action. The SFC found RaffAello did not perform all reasonable due diligence before submitting the application and failed to apply professional scepticism to information provided by Paprika. Deficiencies included inadequate follow-up on unusual retail sales patterns and documentation that presented red flags of potentially fabricated transactions, and insufficient work to verify the independence and commercial substance of Paprika’s largest wholesaler, Novi eBusiness Limited, and fifth largest supplier, API Trading Company Limited, despite indicators of possible control links to Paprika and other risk factors. While the SFC had originally proposed a HKD 13 million fine, it reduced the penalty to HKD 4 million to reflect RaffAello’s financial difficulties, and the Tribunal agreed that an excessive penalty could drive the firm into liquidation to the detriment of existing clients. The Tribunal also highlighted that when issues arise during due diligence, sponsors should undertake additional due diligence, make coherent records of what was identified and resolved, and consult appropriately rather than assuming reporting accountants have independently addressed the same concerns.
Hong Kong Securities & Futures Commission 2025-09-25
Hong Kong Securities and Futures Commission reprimand and HKD 4 million fine on RaffAello Capital upheld for sponsor due diligence failures
The Hong Kong Securities and Futures Commission fined RaffAello Capital Limited HKD 4 million for inadequate due diligence as sponsor for Paprika Holdings Limited’s listing application. The Securities and Futures Appeals Tribunal upheld the action, citing RaffAello's failure to verify information and address red flags, including unusual sales patterns. The fine was reduced from HKD 13 million due to RaffAello's financial difficulties, with the Tribunal emphasizing the need for thorough due diligence and proper documentation.