Hong Kong Market Misconduct Tribunal’s CITIC Ruling: The Implications

This briefing highlights the implications from the Market Misconduct Tribunal’s recent ruling that CITIC did not engage in market misconduct by publishing a no material adverse change statement.

The ruling clarified the meaning of a material adverse change to the financial position of a company and imposed a high threshold for such a change. Although CITIC was found not to have engaged in market misconduct, it should be noted: (1) the statutory inside information regime was implemented after the relevant events of this case. The same fact pattern if repeated today may well constitute a late disclosure of inside information under the Securities Futures Ordinance; and (2) in the context of commercial agreements, MAC provisions are often drafted more broadly that the language considered in this case. Care should be taken to consider the exact language of a MAC clause before translating across the analysis of the ruling.