Corporate Misconduct Will Be Severely Punished, Hong Kong's SFC Chief Warns

by Mary Swire, for LawAndTax-News.com, Hong Kong

24 March 2003

Speaking at a Foreign Correspondents' Club lunch last week, Andrew Sheng, chairman of Hong Kong's Securities and Futures Commission (SFC) warned that companies and intermediaries face heavy penalties for corporate misconduct under the new Securities and Futures Ordinance, due to come into force on April 1.

Currently, the SFC's options for disciplining offenders are essentially limited to a public reprimand or, at the other end of the scale, the suspension or revocation of a company's registration. Under the terms of the new SFO, however, the regulator will be able to impose fines, launch investigations and prosecutions against those filing false or misleading information, and object to listing applications.

'Do not be surprised if some offenders get fines of up to HK$10 million for serious misconduct under the new law,' Mr Sheng told those attending the FCC lunch meeting, adding: 'We will use our new mix of disciplinary punishments for more effective, proportionate, and dissuasive sanctions.'

Although he reiterated that the SFC's top priority, especially in the wake of several spectacular corporate collapses in the US, is to tackle misconduct by companies and intermediaries, he concluded his speech with a 'small reminder' for investors:

'The fundamental principle of all free markets is still 'caveat emptor'. With the freedom to invest comes personal responsibility. Investors must understand that the first rule of investment is to know what you are buying, know what the risks are and invest with your eyes wide open.'

'What the new law promises is that the investor in Hong Kong will operate in an environment that has rules of the game that are on a par with the most developed of markets.'

Recommended