Hong Kong Analysts Warned Over Use Of Insider Information

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

23 March 2004

In a circular released on Friday which was designed to clarify how analysts can use information supplied to them by the management of listed companies, the Hong Kong Securities and Futures Commission (SFC) warned that analysts who receive non-public price sensitive information about a particular company, and then write reports recommending the purchase or sale of shares in the firm could face a $10 million fine and a 10 year jail term.

According to the SFC:

"Analysts are advised not to ask for non-public price sensitive information from the management of listed companies or other insiders. Even if the management of listed companies or other insiders disclose non-public price sensitive information to analysts, this would only put analysts in an unfavourable position."

The regulator advised companies to issue press releases once they have imparted non-public information to analysts.

Speaking last week, the SFC's Executive Director of Enforcement, Mr Alan Linning explained that:

"Analysts play a vital role in helping investors understand listed companies and make informed investment decisions. Owing to the nature of the work analysts perform, they may get access to information others do not have. As a crucial interface between investors and listed companies, analysts have a positive role to play, but they must remember to play that role fairly and in accordance with the law, especially in relation to the fair dissemination of accurate information. We hope this circular will guide analysts in this complex area."

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