Hong Kong's securities regulator filed a suit against CITIC Ltd, an arm of China's biggest diversified company, and five former directors for allegedly disclosing false or misleading information over losses in 2008.

The Securities and Futures Commission is seeking sanctions against former chairman Larry Yung, former managing director Henry Fan and the other former executive directors of CITIC, it said in a statement on Thursday.

It is also seeking court orders to compensate as many as 4,500 investors in the company.

CITIC Ltd, then called CITIC Pacific Ltd, reported its first annual loss of HK$12.7 billion ($1.6 billion) in 2009 after wrong-way currency bets that were supposed to hedge an iron-ore project in Australia. Hong Kong lawmakers criticized the company for a six-week delay in revealing the losses, and the police raided its offices in 2009.

"There are myriad possible outcomes," Peter Bullock, a Hong Kong-based partner at Pinsent Masons LLP, said by e-mail. "It will not be easy for those being investigated to accurately provision for possible compensation."

CITIC said on Friday in a statement that it is considering the claims and allegations made by the regulator and seeking legal advice.

Yung declined to comment.

CITIC bought currency contracts, betting the Australian dollar would rise, and it incurred losses after the currency tumbled against its United States counterpart. The shares plunged 55 percent on Oct 21, 2008, the day after the company issued a profit warning.

The company and the five directors were aware of the "huge financial exposure arising from the leveraged foreign exchange contracts" before CITIC issued a circular on Sept 12, 2008, that said there was no adverse material change to its finances, the SFC said in its statement.

Investors bought HK$1.9 billion of shares between the date of the circular and the profit warning, the regulator said.

The company's officers did not know the implications of the currency exposure when they failed to disclose the potential losses, a lawyer for CITIC told a court in 2011 when Hong Kong's justice department said it suspected fraud. No criminal charges have been made.

The five directors were either reckless or negligent when the company made its statement in September on its financial status, the SFC said in its filing to the Market Misconduct Tribunal. The directors met on Sept 7, 2008, with the company's finance department providing an analysis of the currency losses, the regulator said.

Following the loss disclosure in October, CITIC sought aid from its Chinese parent and Yung, the son of Rong Yiren, former Chinese vice-president, left the company.

Josephine Chan, a spokeswoman for Hong Kong's Department of Justice, said that any other investigations and proceedings will not be affected by the SFC's action. She declined to comment further.

The company in August changed its name after agreeing to buy Chinese banking and brokerage assets from its parent, CITIC Group Corp. CITIC Group was set up in 1979 as the nation's first State-owned investment corporation.

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