Market Misconduct Tribunal finds Magic Holdings International Limited and its directors culpable of late disclosure of inside information

25 Mar 2020

The Market Misconduct Tribunal (MMT) found that Magic Holdings International Limited (Magic) and five of its directors culpable of the company’s failure to disclose in a timely manner inside information on L’Oréal S.A.’s (L’Oréal) proposed acquisition of Magic in 2013, as required under the corporate disclosure requirements of the Securities and Futures Ordinance (SFO)  (Notes 1 to 3).

The five Magic’s directors are: chairman, Mr Stephen Tang Siu Kun; executive directors, Mr She Yu Yuan, Mr Luo Yao Wen and Mr Cheng Wing Hong, who was also the company secretary at the material time; and non-executive director, Mr Sun Yan (collectively, the five directors).  Tang, She and Luo were co-founders of Magic (collectively, the founders).

The MMT was told that Magic and L’Oréal, a French cosmetics group, had discussions relating to the latter’s acquisition proposal since early March 2013.  In a meeting held on 27 April 2013, L’Oréal and Magic’s founders agreed that an offer price of not less than $5.5 per share would be put before Magic’s board of directors for their consideration.

Magic’s founders indicated to L’Oréal that they would contact Magic’s institutional investors to gauge their interest in the acquisition proposal and they would also support L’Oréal’s request to Magic’s board of directors to carry out due diligence.

However, Magic did not disclose the information relating to L’Oréal’s acquisition proposal to the public until August 2013.

The MMT considered that there was a commercial reality to the negotiations between Magic and L’Oréal and such negotiations had gone beyond testing the waters and that Magic had failed to disclose inside information to the public as soon as reasonably practicable (Note 4). 

In the MMT’s view, Magic’s breach of the disclosure requirements was due to the fact that its directors were not informed in a timely manner of all information relevant to the determination of whether it was necessary to make disclosure about the potential acquisition by L’Oréal to the public.

The MMT hence found that Tang and Cheng had failed to carry out their functions as the company’s chairman and company secretary which resulted in Magic’s breach of the corporate disclosure requirements.  It also found that the five directors had failed to take all reasonable measures to ensure that proper safeguards existed within Magic to prevent it from breaching its disclosure obligation. 

The MMT will hold a hearing on the making of the consequential orders on 25 April 2020.



  1. The proceedings were brought by the Securities and Futures Commission (SFC) under section 307I of the SFO against Magic and its nine directors.  The MMT did not find four of the nine directors of Magic at the material time – Mr Chen Dar Cin, Mr Yan Kam Tong, Mr Yang Rude and Mr Dong Yin Mao – in contravention of their duties under section 307G(2) of the SFO.  For more details, please see the SFC’s press release dated 15 May 2018.
  2. Magic was listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) on 24 September 2010.  Upon completion of L’Oréal’s acquisition of Magic, listing of Magic’s shares on the SEHK was withdrawn on 9 April 2014.
  3. Listed corporations are abided by the law to disclose inside information that has come to their knowledge as soon as reasonably practicable.  Timely disclosure of inside information is central to the orderly operation of the market and underpins the maintenance of a fair and informed market.
  4. The MMT’s report is available on its website (


Page last updated : 25 Mar 2020