China Evergrande’s liquidator has filed a judicial review against the Securities and Futures Commission’s HK$1 billion shareholder compensation agreement with PwC.
The failed developer, now in liquidation, believes that the securities watchdog lacks the statutory authority to settle a market misconduct claim against a non-regulated entity like the auditor.
According to a court document, Evergrande argued that the Accounting and Financial Reporting Council is the regulator responsible for registering, inspecting, and disciplining public interest entity auditors such as PwC.
The SFC has no “freestanding power” to reach an agreement with PwC, it said.
In April, PwC HK agreed to set aside HK$1 billion in compensation to independent minority shareholders over audits of Evergrande without admission of liability. The AFRC also imposed a HK$300 million fine and a six-month practice limitation on PwC.
The agreement was unfairly prejudiced against the applicant and “effectively deprived” it for its interests to be considered, it said.
Evergrande asked the SFC not to take any further steps pursuant to the deal, especially not to distribute the compensation until after the final resolution of its claims at court, but was rejected by the regulator, it added.
