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BANKING ORDINANCE

BANKING ORDINANCE 48. Fees in respect of local representative offices (1) Where the establishment by a bank incorporated outside Hong Kong of a local representative office is approved under section 46 (1), the bank shall pay to the Director of Accounting Services the fee specified in the Second Schedule in relation to that representative office and thereafter, so long as the representative office continues to be maintained by the bank, the bank shall pay to the Director of Accounting Services the fee specified in the Second Schedule on the anniversary in each year of the date of the grant of the approval under that section.

(2) A bank incorporated outside Hong Kong that is maintaining, at the commencement of this Ordinance, a local representative office to which section 46 (2) applies and which representative office was established prior to 1 April 1982 shall, so long as the representative office continues to be maintained by the bank, pay to the Director of Accounting Services the fee specified in the Second Schedule on 1 April of each year.

(3) A bank incorporated outside Hong Kong that is maintaining, at the commencement of this Ordinance, a local representative office to which section 46 (2) applies and which representative office was established on or after 1 April 1982 shall, so long as the representative office continues to be maintained by the bank, pay to the Director of Accounting Services the fee specified in the Second Schedule on the anniversary in each year of the date of the grant of approval, under section 12C (1) of the Banking Ordinance 1964 (Cap. 155, 1983 Ed.) repealed by this Ordinance, of the establishment of that local representative office.

PART IX OVERSEAS BRANCHES, OVERSEAS REPRESENTATIVE OFFICES AND FEES 49. Control of establishment, etc. of overseas branches and overseas representative offices (1) Without prejudice to section 44, an authorized institution which is incorporated in Hong Kong shall be subject to a condition that the institution shall not establish or maintain any overseas branch or overseas representative office there of without the approval of the Monetary Authority.

(2) Subsection (1) applies to every authorized institution incorporated in Hong Kong whether the institution was licensed or registered before, on or after the commencement of this Ordinance, and subsections (4) and (5) apply to an approval granted under subsection (1) whether the approval was granted before, on or after such commencement.

(3) Approval under subsection (1) shall be deemed to have been granted in respect of any overseas branch or overseas representative office lawfully established prior to the commencement of this Ordinance.

(4) The Monetary Authority may at any time, by notice in writing served upon an authorized institution, attach to an approval granted under subsection (1), or deemed to have been granted under subsection (3), in respect of any overseas branch or overseas representative office thereof such conditions, or amend or cancel any conditions so attached, as he may think proper.

(5) The Monetary Authority may at any time revoke, in such case as he thinks fit, an approval granted under subsection (1), or deemed to have been granted under subsection (3), in respect of any overseas branch or overseas representative office.

(6) Where the Monetary Authority refuses to grant approval under subsection (1) or revokes an approval under subsection (5), he shall notify the authorized institution concerned in writing of the refusal or revocation.

(7) Any authorized institution aggrieved by the refusal to grant approval under subsection (1) or by the revocation of an approval under subsection (5) by the Monetary Authority, or by any conditions to which an approval is made subject by the Monetary Authority under subsection (4), may appeal to the Governor in Council against the refusal, the revocation or the conditions, but that refusal, that revocation or, as the case may be, those conditions shall take effect immediately, notwithstanding that an appeal has been or may be made under this subsection.

(8) Every director and every manager of an authorized institution which contravenes the condition in subsection (1) or any condition attached under subsection (4) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000; or (b) on summary conviction to a fine of $ 50,000, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Amended 82 of 1992 s. 25) 50. Conditions regarding overseas branches and overseas representative offices (1) Every authorized institution incorporated in Hong Kong which maintains an overseas branch there of shall be subject to a condition that- (a) the institution shall submit to the Monetary Authority a return in such form, and at such intervals, as he may specify showing the assets and liabilities of the overseas branch; (b) the institution shall submit to the Monetary Authority such further information as he may consider necessary for the proper understanding of the functions and activities of the overseas branch, and that such information shall be submitted within such period and in such manner as the Monetary Authority may require; (c) if the Monetary Authority requires any return submitted to him pursuant to paragraph (a), or any information submitted to him pursuant to a requirement under paragraph (b), to be accompanied by a report prepared by, subject to subsection (2A), an auditor or auditors appointed by the institution, the institution shall submit a report as to whether or not, in the opinion of the auditor or auditors, the return or information is correctly compiled, in all material respects, from, the books and records of the overseas branch; (Amended 67 of 1992 s. 2) (d) if the Monetary Authority wishes to examine the books, accounts and transactions of the overseas branch, the institution shall for that purpose afford the person carrying out the examination at the place where the branch is maintained access to the books and accounts of the branch, to documents of title to the assets and other documents and to all securities held by the branch in respect of its customers' transactions and its cash and to such information and facilities as may be required to conduct the examination, and that the institution shall produce to the person carrying out the examination such books, accounts, documents, securities, cash or other information as he may require: Provided that, so far as is consistent with the conduct of the examination, such books, accounts, documents, securities and cash shall not be required to be produced at such times and such places as shall interfere with the proper conduct of the normal daily business of the overseas branch. (Amended 82 of 1992 s. 25) (2) Every authorized institution incorporated in Hong Kong which maintains an overseas representative office thereof shall be subject to a condition that- (a) the institution shall submit to the Monetary Authority such information as he may require regarding the functions and activities of the overseas representative office; (b) if the Monetary Authority wishes to examine the functions and activities of the overseas representative office, the institution shall for that purpose afford the person carrying out the examination at the place where the representative office is maintained access to the documents maintained by the representative office and to such information and facilities as may be required to conduct the examination, and that the institution shall produce to the person carrying out the examination such documents or other information as he may require. (Amended 82 of 1992 s.

25) (2A) The auditor or auditors appointed by an authorized institution to prepare a report required under subsection (1) (c) shall be- (a) an auditor or auditors appointed by the institution prior to the report being so required and approved by the Monetary Authority for the purpose of preparing the report; (b) an auditor approved, or an auditor from amongst auditors nominated, by the Monetary Authority for the purpose of preparing the report after consultation with the institution; or (c) an auditor referred to in paragraph (a) and an auditor referred to in paragraph (b), as may be required by the Monetary Authority. (Added 67 of 1992 s. 2. Amended 82 of 1992 s. 25) (3) This section applies to every authorized institution incorporated in Hong Kong whether the institution was licensed or registered before, on or after the commencement of this Ordinance.

(4) Every director and every manager of an authorized institution which contravenes any condition in subsection (1) or (2), or fails to comply with any requirement under those subsections, commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(5) If an authorized institution produces any book, account, document, security or information whatsoever under this section which is false in a material particular, every director and every manager of the institution commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(6) Any person who signs any document for the purposes of this section which he knows or reasonably ought to know to be false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

51. Fees in respect of overseas branches and overseas representative offices (1) Whenever the establishment by an authorized institution incorporated in Hong Kong of an overseas branch or overseas representative office is approved under section 49 (1), the institution shall pay to the Director of Accounting Services the fee specified in the Second Schedule in relation to that branch or representative office and thereafter, so long as the branch or representative office continues to be maintained by the institution, it shall pay to the Director of Accounting Services the fee specified in the Second Schedule on the anniversary in each year of the date on which the institution was licensed or registered, as the case may be.

(2) An authorized institution incorporated in Hong Kong that is maintaining, at the commencement of this Ordinance, an overseas branch or overseas representative office to which section 49 (3) applies shall, so long as the branch or representative office continues to be maintained by the institution, pay to the Director of Accounting Services the fee specified in the Second Schedule on the anniversary in each year of the date on which the institution was licensed or registered, as the case may be.

PART X POWERS OF CONTROL OVER AUTHORIZED INSTITUTIONS 52. Powers of Monetary Authority (1) Where- (a) an authorized institution informs the Monetary Authority- (i) that it is likely to become unable to meet its obligations; or (ii) that it is insolvent or about to suspend payment; (b) an authorized institution becomes unable to meet its obligations or suspends payment; (c) after an examination or investigation is made under section 55, the Monetary Authority is of the opinion that an authorized institution- (i) is carrying on its business in a manner detrimental to the interests of its depositors or of its creditors; (ii) is insolvent or is likely to become unable to meet its obligations or is about to suspend payment; (iii) has contravened or failed to comply with any of the provisions of this Ordinance; or (iv) has contravened or failed to comply with any condition attached to its licence or registration, the condition specified in section 49 (1), the condition specified in section 50 (1) or the condition specified in section 50 (2); or (d) the Financial Secretary advises the Monetary Authority that he considers it in the public interest to do so, the Monetary Authority, after consultation with the Financial Secretary, may exercise such one or more of the following powers as may from time to time appear to him to be necessary- (A) to require the institution forthwith to take any action or to do any act or thing whatsoever in relation to its business as he may consider necessary; (B) to appoint a person to advise the institution in the proper conduct of its business; (C) to assume control of and carry on the business of the institution, or direct some other person to assume control of and carry on the business of the institution; (D) to report the circumstances to the Governor in Council.

(2) Except in the circumstances specified in subsection (1) (a), the Monetary Authority shall not exercise the power conferred by subsection (1) (D) unless he has- (a) given to the authorized institution not less than 7 days' notice in writing (or such lesser period as is permitted under subsection (2A) stating- (i) his intention to exercise such power; and (ii) his reasons for the exercise thereof; and (b) afforded the institution an opportunity to submit to him representations in writing thereon (which representations, if any, shall form part of his report to the Governor in Council). (Replaced 67 of 1992 s. 3) (2A) The Monetary Authority may give an authorized institution less than the 7 days' notice in writing referred to in subsection (2) where- (a) he has the consent of the Financial Secretary to do so; and (b) to do so is reasonable in the circumstances.

(Added 67 of 1992 s. 3) (3) Any person aggrieved by the exercise by the Monetary Authority of any of the powers conferred on him by subsection (1) (A), (B) and (C) may appeal to the Governor in Council against the exercise of those powers, but that exercise of those powers shall take effect immediately, notwithstanding that an appeal has been or may be made under this subsection.

(4) Every director and every manager of an authorized institution which fails to comply with any requirement of the Monetary Authority under subsection (1) (A) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 1,000,000 and to imprisonment for 5 years and, in the case of a continuing offence, to a further fine of $ 50,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(Amended 82 of 1992 s. 25) 53. Powers of Governor in Council (1) Where- (a) the Monetary Authority makes a report to the Governor in Council under section 52 (1) (D); (b) any person appeals to the Governor in Council under section 52 (3); or (c) the Financial Secretary refers a report and his recommendations thereon to the Governor in Council under section 117 (5) (c), the Governor in Council may, without prejudice to the powers conferred on him, the Monetary Authority or the Financial Secretary, as the case may be, by section 29 (b), 31 (1) (i) or 32 (1) (i) or Part VI, exercise one or more of the following powers- (i) to confirm, vary or reverse any requirement, appointment or direction made by the Monetary Authority; (ii) to make such order as he may think fit in relation to the affairs of the authorized institution and exercise any power which the Monetary Authority may exercise under section 52 (1); (iii) to direct the Financial Secretary to present a petition to the High Court for the winding-up of the authorized institution or former authorized institution by the High Court. (Amended 82 of 1992 s. 25) (2) The Governor in Council may, before considering any report or appeal under subsection (1), seek the advice of the Banking Advisory Committee or the Deposit-taking Companies Advisory Committee, or both, but shall not be bound to follow any such advice.

(3) Every director and every manager of an authorized institution which fails to comply with an order of the Governor in Council under subsection (1) (ii) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 1,000,000 and to imprisonment for 5 years and, in the case of a continuing offence, to a further fine of $ 50,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

54. Remuneration and expenses of Monetary Authority and others in certain cases (1) The Monetary Authority, after consultation with the Financial Secretary, may at any time, whether or not the appointment of such person has terminated, fix the remuneration and expenses to be paid by an authorized institution to any person appointed by the Monetary Authority under section 52 (1) or by the Governor in Council under section 53 (1) to advise the institution in the proper conduct of its business.

(2) Where the Monetary Authority has assumed control of the business of an authorized institution under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii) or some other person has assumed control of the business of an authorized institution pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii), the Monetary Authority, after consultation with the Financial Secretary, may at any time, whether or not he or such other person has ceased to be in control of the business of the institution, fix the remuneration and expenses to be paid by the institution to him, and to any person employed or authorized by him under section 8 to assist him in the control of and the carrying on of the business of the institution, or to such other person, as the case may be.

(3) Any authorized institution aggrieved by a decision of the Monetary Authority under subsection (1) or (2) may appeal to the Governor in Council against the decision. (Amended 82 of 1992 s. 25) 55. Examination and investigation of authorized institutions, etc.

(1) Without limiting the generality of section 52, the Monetary Authority may at any time, with or without prior notice to the authorized institution, examine the books, accounts and transactions of any authorized institution and, in the case of an authorized institution incorporated in Hong Kong, any local branch, overseas branch, overseas representative office or subsidiary, whether local or overseas, of such institution.

(2) Without limiting the generality of section 52, the Monetary Authority shall investigate the books, accounts and transactions of an authorized institution- (a) if shareholders of the institution holding not less than one-third of the total number of issued shares in the institution, or depositors holding not less than one-tenth of the gross amount of the total deposit liabilities in Hong Kong of the institution or a sum equal to the aggregate of the paid-up share capital of the institution and its published reserve, whichever is the greater, apply to him to make such an investigation and submit to him such evidence as he considers necessary to justify the investigation and furnish such security for the payment of the costs of the investigation as he may require; or (b) if the institution suspends payment or informs him of its intention to suspend payment.

(3) Where an investigation is made by the Monetary Authority pursuant to subsection (2), the Financial Secretary may order that all expenses incurred in such investigation shall be defrayed- (a) by the authorized institution; or (b) if the investigation was made pursuant to subsection (2) (a), either wholly by the persons who applied for the making of the investigation or partly by the authorized institution in such proportions as he considers to be just.

(Amended 82 of 1992 s. 25) 56. Production of authorized institution's books, etc.

(1) For the purposes of an examination or investigation under section 55, an authorized institution and, in the case of an authorized institution incorporated in Hong Kong, any local branch, overseas branch, overseas representative office or subsidiary, whether local or overseas, of such institution shall afford the person carrying out the examination or investigation access to its books and accounts, to documents of title to its assets and other documents, to all securities held by it in respect of its customers' transactions and its cash and to such information and facilities as may be required to conduct the examination or investigation, and shall produce to the person carrying out the examination or investigation such books, accounts, documents, securities, cash or other information as he may require: Provided that, so far as is consistent with the conduct of the examination or investigation, such books, accounts, documents, securities and cash shall not be required to be produced at such times and such places as shall interfere with the proper conduct of the normal daily business of the institution, local branch, overseas branch, overseas representative office or subsidiary, as the case may be. (Amended 64 of 1987 s. 12) (2) Every director and every manager of an authorized institution which, without reasonable excuse, contravenes this section (which contravention shall include a contravention by any of the institution's local branches, overseas branches, overseas representative offices or subsidiaries) commits an offence and is liable- (Amended 64 of 1987 s. 12) (a) on conviction upon indictment to a fine of $ 100,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(3) If any authorized institution or any local branch, overseas branch, overseas representative office or subsidiary of the institution produces any book, account, document, security or information whatsoever under this section which is false in a material particular, every director and every manager of the institution commits an offence and is liable- (Amended 64 of 1987 s. 12) (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

57. Control of authorized institution by the Monetary Authority (1) Where the Monetary Authority has assumed control of the business of an authorized institution under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii) or some other person has assumed control of the business of an authorized institution pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii), then, subject to subsection (2), the Monetary Authority or such other person, as the case may be, shall remain in control and continue to carry on the business of that institution in the name and on behalf of the institution until it is no longer necessary, in the opinion of the Financial Secretary, for the Monetary Authority or such other person to remain in control of the institution.

(2) Where the Monetary Authority has assumed control of the business of an authorized institution under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii) or some other person has assumed control of the business of an authorized institution pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii), the Governor in Council, upon the application of the institution, may, if he is satisfied that it is no longer necessary for the protection of the depositors of the institution that the Monetary Authority or such other person should remain in control of the business of the institution, order that the Monetary Authority or such other person shall cease to control the business of the institution as from a date specified in the order.

(3) Where the Monetary Authority has assumed control of the business of an authorized institution under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii) or some other person has assumed control of the business of an authorized institution pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii) or any such control has been relinquished pursuant to any of the provisions of this section, the Financial Secretary shall cause to be published in the Gazette a notification of the fact of the assumption or cessation of such control, as the case may be. (Amended 82 of 1992 s. 25) 58. Authorized institution under control of Monetary Authority to co- operate with Monetary Authority (1) Where the Monetary Authority has assumed control of the business of an authorized institution under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii), or some other person has assumed control of the business of an authorized institution pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii), the institution shall submit its business to the control of the Monetary Authority or such other person and shall provide him with the services of such members of its staff and such other facilities as he may consider necessary for carrying on the business of the institution and in connection therewith the directors and managers shall comply with and carry out any directions which the Monetary Authority or such other person may give to them.

(2) Without limiting the generality of subsection (1), where by reason of the absence of directors or for any reason whatsoever the seal of an authorized institution whose business is- (a) in the control of the Monetary Authority under section 52 (1) (C) or pursuant to an order of the Governor in Council under section 53 (1) (ii); or (b) in the control of some other person pursuant to a direction under section 52 (1) (C) or an order of the Governor in Council under section 53 (1) (ii), cannot be affixed to an instrument in accordance with the institution's articles of association or regulations, the seal may be affixed in the presence of, and its affixing may be attested by, the Monetary Authority or such other person or a person authorized for the purpose by the Monetary Authority or such other person.

(3) Where the seal of an authorized institution has been affixed to an instrument, and the affixing thereof has been attested, in accordance with subsection (2), no person shall be concerned to see that the seal could not be affixed in accordance with the institution's articles of association or regulations.

(4) Every director and every manager- (a) of an authorized institution which contravenes subsection (1); or (b) who fails without reasonable excuse to comply with or to carry out any direction given by the Monetary Authority or some other person under subsection (1), commits an offence and is liable- (i) on conviction upon indictment to a fine of $ 1,000,000 and to imprisonment for 5 years and, in the case of a continuing offence, to a further fine of $ 50,000 for every day during which the offence continues; or (ii) on summary conviction to a fine of $ 50,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(Amended 82 of 1992 s. 25) PART XI AUDITS AND MEETINGS 59. Audit (1) Every authorized institution, and its auditors, shall comply with the Companies Ordinance (Cap. 32) with respect to the audit of a company's accounts, whether or not the institution is incorporated under that Ordinance.

(2) The Monetary Authority may, after consultation with an authorized institution, by notice in writing to the institution require the institution to submit to him a report- (a) subject to subsection (3), prepared by an auditor or auditors appointed by the institution; (b) on such matters as the Monetary Authority may reasonably require for the exercise of his functions under this Ordinance including, but without limiting the generality of such matters, such a report- (i) on the state of affairs or profit and loss, or both, of the institution based on an audit of the institution's accounts carried out in respect of the period specified in the notice requiring such a report; or (ii) on whether or not the institution has in place systems of control which are adequate to enable, as much as is practicable, the business of the institution to be prudently managed and the institution to comply with its duties under this Ordinance; and (c) within such period and prepared in such manner as the Monetary Authority may reasonably require. (Replaced 67 of 1992 s. 4. Amended 82 of 1992 s. 25) (3) The auditor or auditors appointed by an authorized institution to prepare a report required under subsection (2) shall be- (a) an auditor or auditors appointed by the institution prior to the report being so required and approved by the Monetary Authority for the purpose of preparing the report; (b) an auditor approved, or an auditor from amongst auditors nominated, by the Monetary Authority for the purpose of preparing the report after consultation with the institution; or (c) an auditor referred to in paragraph (a) and an auditor referred to in paragraph (b), as may be required by the Monetary Authority. (Replaced 67 of 1992 s. 4. Amended 82 of 1992 s. 25) (4) Section 60 (1) (a) shall not apply to anything done for the purposes of subsection (2) (b) (i) unless otherwise specified by the Monetary Authority by notice in writing to the authorized institution concerned.

(Replaced 67 of 1992 s. 4. Amended 82 of 1992 s. 25) (5) Every director and every manager of an authorized institution which contravenes subsection (1) or (2) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence under subsection (2), to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence under subsection (2), to a further fine of $ 5,000 for every day during which the offence continues. (Amended 67 of 1992 s. 4) (6) In this section- "adequate", in relation to systems of control, includes operating effectively; "systems of control" includes procedures. (Added 67 of 1992 s. 4) (Amended 43 of 1990 s. 3) 59A. Notification in respect of auditors (1) An authorized institution incorporated in Hong Kong shall immediately give written notice to the Monetary Authority if- (a) the institution- (i) proposes to give notice to its shareholders of an ordinary resolution removing an auditor before the expiration of his term of office; or (ii) gives notice to its shareholders of an ordinary resolution replacing an auditor at the expiration of his term of office; or (b) a person ceases to be an auditor of the institution otherwise than in consequence of such a resolution.

(2) An auditor of an authorized institution appointed under section 131 of the Companies Ordinance (Cap. 32) shall immediately give written notice to the Monetary Authority if he- (a) resigns before the expiration of his term of office; (b) does not seek to be re-appointed; or (c) decides to include in his report on the institution's accounts any qualification or adverse statement as to a matter mentioned in section 141 of the Companies Ordinance (Cap. 32).

(3) Every director and every manager of an authorized institution which contravenes subsection (1) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and to a further fine of $ 10,000 for every day for which the institution fails to give the notice required under that subsection to the Monetary Authority; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and to a further fine of $ 5,000 for every day for which the institution fails to give the notice required under that subsection to the Monetary Authority. (Added 43 of 1990 s. 4. Amended 82 of 1992 s. 25) 60. Publication of audited balance sheet, etc.

(1) Every authorized institution shall, not later than 6 months after the close of each financial year, publish in one English language daily newspaper and one Chinese language daily newspaper, each of which shall be a newspaper circulating in Hong Kong- (a) a copy of its audited annual balance sheet for that year, and any notes thereon, a copy of the profit and loss account and a copy of the report of the auditor made pursuant to section 141 of the Companies Ordinance (Cap. 32); (Amended 95 of 1991 s. 15) (b) the full and correct names of all persons who are directors or managers for the time being of the institution; and (c) the names of all subsidiaries, for the time being, of the institution, and shall thereafter exhibit them throughout the year in a conspicuous position in the principal place of business of the institution in Hong Kong and in each local branch, together with, in the case of an authorized institution which is a company limited by shares or limited by guarantee and having a share capital, a copy of the report of the directors laid before the company in general meeting in accordance with section 129D (1) of the Companies Ordinance (Cap. 32).

(2) A copy of each of the documents referred to in subsection (1) shall be lodged with the Monetary Authority by an authorized institution, prior to first exhibition thereof under subsection (1), with a list of the names of all companies of which, for the time being, its directors are also directors. (Amended 82 of 1992 s. 25) (3) If, in the case of an authorized institution incorporated outside Hong Kong, the Monetary Authority is satisfied that a report has been duly made by an auditor, or any person exercising a similar function in accordance with the law of the place in which the institution is incorporated, upon the annual balance sheet and accounts of the institution and a copy of such report and the report of the directors of such institution is sent to the Monetary Authority, he may by notice in writing exempt any such institution from this section and section 59 (1) subject to such conditions as he may think proper to attach thereto.

(Amended 82 of 1992 s. 25) (4) The Monetary Authority may require any authorized institution to submit such further information as he may think necessary for the proper understanding of the balance sheet and profit and loss accounts sent by that institution under subsection (2); and such information shall be submitted within such period and in such manner as the Monetary Authority may require. (Amended 82 of 1992 s. 25) (5) The annual balance sheet of an authorized institution, copies of which are required by subsection (1) to be exhibited, shall be in such form as the Monetary Authority may approve. (Amended 82 of 1992 s. 25) (6) Every director and every manager of an authorized institution which contravenes subsection (1), (2) (3) or (5) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000; or (b) on summary conviction to a fine of $ 50,000, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(7) Every director and every manager of an authorized institution which fails without reasonable excuse to comply with any requirement under subsection (4) commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 2,500 for every day during which the offence continues.

61. Communication by auditor with Monetary Authority (1) No duty which an auditor of an authorized institution may be subject to shall be regarded as contravened by reason of his communicating in good faith to the Monetary Authority, whether or not in response to a request made by the Monetary Authority, any information or opinion on a matter of which he becomes aware in his capacity as auditor and which is relevant to any function of the Monetary Authority under this Ordinance. (Amended 82.

of 1992 s. 25) (2) Subsection (1) applies to an auditor of a former authorized institution and a former auditor as it applies to an auditor of an authorized institution. (Replaced 43 of 1990 s. 5) 62. (Repealed 43 of 1990 s. 6) PART XII DISCLOSURE OF INFORMATION BY AUTHORIZED INSTITUTIONS 63. Returns and information to be submitted to the Monetary Authority (1) Every authorized institution shall submit to the Monetary Authority- (a) not later than 14 days after the last day of each calendar month a return showing the assets and liabilities of its principal place of business in Hong Kong and all local branches thereof at the close of business on the last business day or last day of that month; and (b) not later than 14 days after the last day of each quarter ending on 31 March, 30 June, 30 September and 31 December respectively, or upon any other day which may be approved by the Monetary Authority, a return relating to its principal place of business in Hong Kong and all local branches there of as at the close of business on the last business day or last day of the preceding quarter: Provided that the Monetary Authority may by permission in writing allow the returns referred to in paragraphs (a) and (b) to be submitted at less frequent intervals. (Amended 95 of 1991 s. 16) (2) The Monetary Authority may require an authorized institution to submit such further information as he may reasonably require for the exercise of his functions under this Ordinance and such information shall be submitted within such period and in such manner as the Monetary Authority may require. (Amended 3 of 1990 s. 26) (2A) The Monetary Authority may require any subsidiary of an authorized institution to submit such information as he may reasonably require for the exercise of his functions under this Ordinance and such information shall be submitted within such period and in such manner as the Monetary Authority may require. (Added 3 of 1990 s. 26) (3) The Monetary Authority may require an authorized institution to submit to him, on or before such date as he may reasonably specify in the requirement, a report prepared by, subject to subsection (3B), an auditor or auditors appointed by the institution as to whether or not, in the opinion of the auditor or auditors, a return submitted to him pursuant to subsection (1), or information submitted to him pursuant to subsection (2), by the institution is correctly compiled, in all material respects, from the books and records of the institution and, if not so correctly compiled, the nature and extent of the incorrectness. (Replaced 67 of 1992 s. 5) (3A) The Monetary Authority may require an authorized institution to submit to him, on or before such date as he may reasonably specify in the requirement and, subject to subsection (3C), in respect of the period specified in the requirement, a report prepared by, subject to subsection (3B), an auditor or auditors appointed by the institution as to all or any of the following- (a) whether or not, during that period, in the opinion of the auditor or auditors, the institution had in place systems of control which were adequate to enable, as much as is practicable- (i) the institution's returns or information to be correctly compiled, in all material respects, from the books and records of the institution; (ii) the institution to comply with its duties under Parts XII, XV, XVII and XVIII; (iii) if the institution is incorporated in Hong Kong, the institution to maintain adequate provision for depreciation or diminution in the value of its assets (including provision for bad and doubtful debts), for liabilities which will or may fall to be discharged by it and for losses which will or may occur, and, if the opinion is that those systems were not adequate, the nature and extent of any inadequacies; (b) subject to subsection (3D), whether or not, during that period- (i) there appears to the auditor or auditors to be any material contravention by the institution of any of the duties referred to in paragraph (a) (ii), and, if it so appears, the nature of the contravention and the evidence therefor; (ii) if the institution is incorporated in Hong Kong, it appears to the auditor or auditors that the institution has failed to maintain the adequate provision referred to in paragraph (a) (iii), and, if it so appears, the reasons or evidence therefor; (iii) subject to subsection (3E), there was any matter which, in the opinion of the auditor or auditors, adversely affects the financial position of the institution to a material extent, and if there was, the nature of the matter and the reason why the auditor or auditors is or are of that opinion. (Added 67 of 1992 s. 5) (3B) The auditor or auditors appointed by an authorized institution to prepare a report required under subsection (3) or (3A) shall be- (a) an auditor or auditors appointed by the institution prior to the report being so required and approved by the Monetary Authority for the purpose of preparing the report; (b) an auditor approved, or an auditor from amongst auditors nominated, by the Monetary Authority for the purpose of preparing the report after consultation with the institution; or (c) an auditor referred to in paragraph (a) and an auditor referred to in paragraph (b), as may be required by the Monetary Authority. (Added 67 of 1992 s. 5) (3C) No period specified in a requirement under subsection (3A) shall exceed 12 months unless the Monetary Authority is satisfied that a longer period is required in the interests of depositors of the authorized institution concerned or the public interest. (Added 67 of 1992 s. 5) (3D) No report shall be required under subsection (3A) as to a matter referred to in paragraph (b) of that subsection unless the report is also required as to a matter referred to in paragraph (a) of that subsection.

(Added 67 of 1992 s. 5) (3E) In relation to any authorized institution incorporated outside Hong Kong, subsection (3A) (b) (iii) shall apply only to its principal place of business in Hong Kong and its local branches, and shall do so as if that principal place of business and those branches were collectively a separate authorized institution. (Added 67 of 1992 s. 5) (3F) In this section- "adequate", in relation to systems of control, includes operating effectively; "systems of control" includes procedures. (Added 67 of 1992 s. 5) (4) Notwithstanding section 120, the Monetary Authority may prepare and publish consolidated statements aggregating the figures in the returns furnished under subsection (1).

(5) Every director and every manager of an authorized institution which contravenes subsection (1), or fails to comply with any requirement under subsection (3) or (3A), commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Amended 67 of 1992 s. 5) (6) Every director and every manager of an authorized institution which fails without reasonable excuse to comply with any requirement under subsection (2), and every director and every manager of a subsidiary of an authorized institution which fails without reasonable excuse to comply with any requirement under subsection (2A), commits an offence and is liable- (Amended 3 of 1990 s. 26) (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(7) Any person who signs any document for the purposes of this section which he knows or reasonably ought to know to be false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months. (Amended 82 of 1992 s. 25) 64. Information on shareholding, etc.

(1) Every authorized institution shall, if so required by the Monetary Authority, inform him of the name and address of, and the nature of the business carried on by, every company- (Amended 3 of 1990 s. 27; 82 of 1992 s. 25) (a) in which the institution holds the beneficial ownership, directly or indirectly, of an aggregate of 20 per cent or more of the share capital; (b) where any director or manager of that company is also a director or manager of the institution; (c) where the name of that company has common features with the name of the institution; (d) which, by whatever means, acts in concert with the institution to promote the institution's business; or (e) the controller of which is also the controller of the institution.

(2) The Monetary Authority may require any authorized institution which has submitted to him information pursuant to subsection (1) to submit to him such further information as he may reasonably require for the exercise of his functions under this Ordinance. (Amended 3 of 1990 s. 27; 82 of 1992 s. 25) (3) Information that is required to be submitted under this section shall be submitted within such period and in such manner as the Monetary Authority may require. (Amended 82 of 1992 s. 25) (4) Every director and every manager of an authorized institution which fails without reasonable excuse to comply with any requirement under this section commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(5) Any person who signs any document for the purposes of this section which he knows or reasonably ought to know to be false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(6) If an authorized institution produces any book, account, document, security or information under this section which is false in a material particular, every director and every manager of the institution commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

65. Alteration in constitution (1) An authorized institution, within 30 days after the making of any alteration to the memorandum of association, articles of association or other instrument under which it is incorporated, shall furnish to the Monetary Authority particulars of such alteration in writing, verified by a director of the institution. (Amended 82 of 1992 s. 25) (2) Every director and every manager of an authorized institution which contravenes this section commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

66. Authorized institution to notify Monetary Authority when it ceases to take deposits (1) An authorized institution which ceases to carry on the business of taking deposits or, as the case may be, banking business, shall forthwith notify the Monetary Authority in writing of that fact. (Amended 82 of 1992 s. 25) (2) Every director and every manager of an authorized institution which fails to comply with this section commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 10,000.

67. Duty to report inability to meet obligations (1) If any authorized institution is likely to become unable to meet its obligations or if it is about to suspend payment it shall forthwith report all relevant facts, circumstances and information to the Monetary Authority. (Amended 82 of 1992 s. 25) (2) Every director and every manager of an authorized institution which fails without reasonable excuse to comply with subsection (1) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

68. Examination by authorities outside Hong Kong The appropriate recognized banking supervisory authority of a place outside Hong Kong may, with the approval of the Monetary Authority, examine the books, accounts and transactions of the principal place of business in Hong Kong or any local branch, or the documents of any local representative office- (Amended 82 of 1992 s. 25) (a) of an authorized institution which is incorporated in that place; or (b) of an authorized institution which is incorporated in or outside Hong Kong and is a subsidiary of a bank or other body corporate which is incorporated in that place.

PART XIII OWNERSHIP AND MANAGEMENT OF AUTHORIZED INSTITUTIONS 69. Amalgamation, etc. requires approval (1) An authorized institution incorporated in Hong Kong shall not, in the case of an authorized institution which is a bank or restricted licence bank, without the prior approval in writing of the Financial Secretary, and in the case of an authorized institution which is a deposit-taking company, without the prior approval of the Monetary Authority- (Amended 3 of 1990 s. 28; 82 of 1992 s. 25) (a) make any arrangement or enter into any agreement for the sale or disposal of all or any part of- (i) in the case of a bank, its banking business; and (ii) in the case of a restricted licence bank or a deposit-taking company, its business of taking deposits; or (Amended 3 of 1990 s. 28) (b) (Repealed 95 of 1991 s. 17) (2) An authorized institution incorporated in Hong Kong which- (a) makes any arrangement or enters into any agreement for the sale or disposal of all or any part of its business, irrespective of whether the arrangement or agreement is pursuant to an approval under subsection (1) (a); or (b) makes any reconstruction of its capital. (Amended 95 of 1991 s. 17) shall give notice in writing of the arrangement, agreement or reconstruction, as the case may be, to the Monetary Authority as soon as practicable after making that arrangement, entering into that agreement or making that reconstruction, and- (i) the notice shall be signed by a director of the institution; and (ii) the institution shall provide the Monetary Authority with such information in respect of that arrangement, agreement or reconstruction as he may require. (Amended 82 of 1992 s. 25) (3) An authorized institution aggrieved by a decision of the Financial Secretary or the Monetary Authority refusing his approval for the purposes of subsection (1) may appeal to the Governor in Council against the decision, but the decision shall take effect immediately, notwithstanding that an appeal has been or may be made under this subsection. (Amended 82 of 1992 s. 25) (4) Every director and every manager of an authorized institution which contravenes subsection (1) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(5) Every director and every manager of an authorized institution which contravenes subsection (2) commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(6) If an authorized institution produces any information whatsoever under this section which is false in a material particular, every director and every manager of the institution commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months. (Replaced 64 of 1987 s. 14) 70. Provisions applicable to persons proposing to become controllers of authorized institutions incorporated in Hong Kong (1) This section shall apply to a person becoming or being- (a) a majority shareholder controller; or (b) an indirect controller, of an authorized institution incorporated in Hong Kong as it applies to a person becoming or being, as the case may be, a minority shareholder controller of an authorized institution incorporated in Hong Kong.

(2) In this section- "conditional notice of consent" means a notice of consent referred to in paragraph (b) of the definition of "notice of consent"; "notice of consent" means a notice in writing specifying that- (a) there is no objection to the person specified in that notice becoming or being, as the case may be, a minority shareholder controller of the authorized institution specified in that notice; or (b) the conditions subject to which there is no objection to the person specified in that notice becoming or being, as the case may be, a minority shareholder controller of the authorized institution specified in that notice; "notice of objection" means a notice in writing objecting to the person specified in that notice becoming or being, as the case may be, a minority shareholder controller of the authorized institution specified in that notice.

(3) Subject to subsection (4), no person shall become a minority shareholder controller of an authorized institution incorporated in Hong Kong unless- (a) he has served on the Monetary Authority a notice in writing stating that he proposes to become such a controller; and (b) either- (i) subject to subsection (17), the Monetary Authority has, before the expiration of 3 months from the date of service of that notice, served on him a notice of consent; or (ii) that period has expired without the Monetary Authority having served on him a notice of objection.

(4) A notice referred to in subsection (3) (a) served on the Monetary Authority by a person shall not be regarded as compliance with that subsection except as respects that person becoming a minority shareholder controller of the authorized institution to which the notice relates before the expiration of 12 months from- (a) where that person has been served with a notice of consent, on the date on which he was so served; (b) where the period referred to in subsection (3) (b) has expired and neither of the events specified in that section has occurred, on the expiration of that period; (c) where that person has been served with a notice of objection in respect of which an appeal under subsection (15) has been successful, on the date on which the appeal was successful.

(5) Where a person- (a) becomes a minority shareholder controller of an authorized institution in contravention of subsection (3); (b) did not know that the acts or circumstances by virtue of which he became such a controller were such as to have that effect; and (c) subsequently becomes aware of the fact that he has become such a controller, he shall serve on the Monetary Authority, not later than 14 days after becoming aware of that fact, a notice in writing stating that he has become such a controller.

(6) Subject to subsections (7), (8), (9) and (10), the Monetary Authority may serve- (a) a notice of consent; or (b) a notice of objection, on a person.

(7) Without limiting the generality or conditions which the Monetary Authority may specify in a conditional notice of consent, he may specify in the notice such conditions as be may think proper to safeguard the interests of depositors and potential depositors of the authorized institution specified in the notice.

(8) The Monetary Authority shall not serve a notice of objection on a person where the Monetary Authority is satisfied- (a) that the person is a fit and proper person to become or to be, as the case may be, a minority shareholder controller of the authorized institution specified in the notice; (b) that the interests of depositors and potential depositors of that institution would not be or are not, as the case may be, in some other manner threatened by that person becoming or being, as the case may be, such a controller; and (c) where that person- (i) is not presently such a controller, that, having regard to that person's likely influence on that institution if he was to become such a controller- (A) if the Monetary Authority is of the opinion that that institution is presently conducting its business prudently, the institution is likely to continue so conducting its business; (B) if the Monetary Authority is of any other opinion, that person is likely to undertake adequate remedial action; (ii) is presently such a controller, that, having regard to that person's influence on that institution as such a controller- (A) if the Monetary Authority is of the opinion that that institution was conducting its business prudently before that person became such a controller, the institution is presently, and is likely to continue, so conducting its business; (B) if the Monetary Authority is of any other opinion, that person is presently undertaking, or is likely to undertake, adequate remedial action.

(9) The Monetary Authority shall not serve a conditional notice of consent or notice of objection on a person who has become a minority shareholder controller of an authorized institution- (a) unless he has become such a controller in contravention of subsection (3); (b) subject to subsection (17), after the expiration of 3 months immediately following the Monetary Authority becoming aware of such contravention.

(10) The Monetary Authority shall, before serving a conditional notice of consent or notice of objection on a person, serve on that person a preliminary notice in writing- (a) stating that the Monetary Authority is considering the service on him of a conditional notice of consent or notice of objection, as the case may be; (b) where the Monetary Authority is considering the service on him of- (i) a conditional notice of consent, specifying the conditions which the Monetary Authority proposes to specify in the notice; (ii) a notice of objection, specifying which of the matters referred to in subsection (8) in respect of which the Monetary Authority is not satisfied; and (c) stating that he may, within 1 month from the date of service of the preliminary notice, make written representations to the Monetary Authority.

(11) Where representations are made in accordance with subsection (10) (c), the Monetary Authority shall take them into account in deciding whether to serve the conditional notice of consent or notice of objection, as the case may be, concerned.

(12) A conditional notice of consent served on a person- (a) may specify conditions which were not specified in the preliminary notice served under subsection (10) on that person where- (i) that person consents to those conditions; or (ii) a subsequent preliminary notice specifying those conditions has been served under that subsection on that person; and (b) shall give particulars of the right conferred by subsection (15).

(13) A notice of objection served on a person- (a) shall, subject to paragraph (b), specify which of the matters referred to in subsection (8) in respect of which the Monetary Authority is not satisfied; (b) shall not specify any such matters which were not specified in the preliminary notice served under subsection (10) on that person; and (c) shall give particulars of the right conferred by subsection (15).

(14) The Monetary Authority shall not be obliged to disclose to a person any particulars of the matters referred to in subsection (8) on which he is considering the service on him or has served on him, as the case may be, a notice of objection.

(15) Any person aggrieved by a decision of the Monetary Authority to serve a conditional notice of consent or notice of objection on him may appeal to the Governor in Council against the decision, but that decision shall take effect immediately, notwithstanding that an appeal has been or may be made under this subsection.

(16) Where the Monetary Authority pursuant to section 72A requires a person who has given a notice in writing under subsection (3) (a) or (5) to submit information, the time between imposing that requirement and the receipt of the information shall be added to the period referred to in subsection (3) (b) or (9) (b), as the case may be.

(17) The period referred to in subsection (3) (b) or (9) (b) (together with any extension under subsection (16) shall not expire, if it would otherwise do so, until 14 days after the expiration of the period within which representations can be made in accordance with subsection (10) (c).

(18) Subject to subsection (19), any person who contravenes subsection (3) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 5 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(19) Where a person is charged with an offence under subsection (18), it shall be a defence to prove that he did not know that the acts or circumstances by virtue of which he became a minority shareholder controller of the authorized institution concerned were such as to have that effect.

(20) Any person who contravenes subsection (5) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(21) Any person who contravenes any condition specified in a conditional notice of consent served on him commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

Replaced 95 of 1991 s. 18. Amended 82 of 1992 s. 25) 70A. Objection to existing controllers (1) This section shall apply to a person being- (a) a majority shareholder controller; or (b) an indirect controller, of an authorized institution incorporated in Hong Kong as it applies to a person being a minority shareholder controller of an authorized institution in corporated in Hong Kong.

(2) In this section, unless the context otherwise requires, "notice of objection" means a notice in writing objecting to the person specified in that notice being a minority shareholder controller of the authorized institution specified in that notice.

(3) Subject to subsection (4), the Monetary Authority may serve a notice of objection on a person- (a) who is a minority shareholder controller of an authorized institution incorporated in Hong Kong where- (i) his being such a controller is not in contravention of section 70 (3); or (ii) his being such a controller is in contravention of that section but the Monetary Authority is prohibited by virtue of section 70 (9) (b) from serving a notice of objection under section 70 (6) on him; and (b) where it appears to the Monetary Authority that- (i) that person is not or is no longer a fit and proper person to be such a controller; (ii) the interests of depositors or potential depositors of that institution may be in some other manner threatened by that person being such a controller; or (iii) that person has contravened any condition specified in a conditional notice of consent served under section 70 (6) on him.

(4) The Monetary Authority shall, before serving a notice of objection on a person, serve on that person a preliminary notice in writing- (a) stating that the Monetary Authority is considering the service on him of a notice of objection; (b) specifying which of the matters referred to in subsection (3) (b) in respect of which the Monetary Authority is considering the service on him of the notice of objection; and (c) stating that he may, within 1 month from the date of service of the preliminary notice, make written representations to the Monetary Authority.

(5) Where representations are made in accordance with subsection (4) (c), the Monetary Authority shall take them into account in deciding whether to serve the notice of objection concerned.

(6) A notice of objection- (a) shall, subject to paragraph (b), specify which of the matters referred to in subsection (3) (b) on which the notice is served; (b) shall not specify any such matters which were not specified in the preliminary notice served under subsection (4) on him; and (c) shall give particulars of the right conferred by subsection (8).

(7) The Monetary Authority shall not be obliged to disclose to a person any particulars of the matters referred to in subsection (3) (b) on which he is considering the service on him or has served on him, as the case may be, a notice of objection.

(8) Any person aggrieved by a decision of the Monetary Authority to serve a notice of objection on him may appeal to the Governor in Council against the decision, but that decision shall take effect immediately, notwithstanding that an appeal has been or may be made under this subsection. (Added 95 of 1991 s. 18. Amended 82 of 1992 s. 25) 70B. Restrictions on and sale of shares (1) This section shall apply to a person being a majority shareholder controller of an authorized institution in corporated in Hong Kong as it applies to a person being a minority shareholder controller of an authorized institution incorporated in Hong Kong.

(2) The powers conferred by this section shall be exercisable where a person- (a) has become a minority shareholder controller of an authorized institution in contravention of section 70 (3) in that- (i) a notice in writing has been served under section 70 (3) (a) on the Monetary Authority by that person in respect of that institution but neither of the events specified in section 70 (3) (b) has occurred; (ii) no notice in writing has been served under section 70 (5) in respect of that contravention; (iii) a notice in writing has been served under section 70 (5) on the Monetary Authority by that person in respect of that contravention, the Monetary Authority has served a notice of objection under section 70 (6) on that person in respect of that contravention, and either- (A) the period specified in the Administrative Appeals Rules (Cap. 1 sub. leg.) within which that person may appeal under section 70 (15) against the decision of the Monetary Authority to serve such notice of objection has expired without any such appeal having been made; or (B) an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful; or (iv) that person has been convicted of an offence under section 70 (18) in respect of that contravention; or (b) continues to be a minority shareholder controller of an authorized institution after having been served with a notice of objection under section 70A (3) in respect of his being such a controller and either- (i) the period specified in the Administrative Appeals Rules (Cap. 1.

sub. leg.) within which that person may appeal under section 70A (8) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70A (8) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful.

(3) Subject to subsection (8), the Monetary Authority may, by notice in writing served on the person concerned, direct that any specified shares to which this section applies shall, until further notice, be subject to one or more of the following restrictions- (a) any transfer of those shares or, in the case of unissued shares, any transfer of the right to be issued with them, and any issue of such shares, shall be void; (b) no voting rights shall be exercisable in respect of the shares; (c) no further shares shall be issued in right of them or pursuant to any offer made to their holder; (d) except in a liquidation, no payment shall be made of any sums due from the authorized institution, or other company, concerned on the shares, whether in respect of capital or otherwise.

(4) Where shares are subject to the restrictions under subsection (3) (a), any agreement to transfer the shares or, in the case of unissued shares, the right to be issued with them, shall be void.

(5) Where shares are subject to the restrictions under subsection (3) (c) or (d), an agreement to transfer any right to be issued with other shares in right of those shares, or to receive any payment on them (otherwise than in a liquidation), shall be void.

(6) Where shares are subject to any restrictions under subsection (3), any person affected by any of those restrictions may request the Monetary Authority to make an application referred to in subsection (7) (a) in respect of those shares and, where such a request is made, the Monetary Authority shall, not later than 1 month after that request has been made- (a) if, by virtue of subsection (9), the Monetary Authority is prohibited from making such an application, serve a notice in writing on that person stating that he is so prohibited; (b) in any other case- (i) comply with that request; or (ii) serve a notice in writing on that person stating that he does not propose to comply with that request.

(7) Subject to subsection (9), the High Court may- (a) on the application of the Monetary Authority, order the sale of any specified shares to which this section applies and, if they are for the time being subject to any restrictions under subsection (3), that they shall cease to be subject to those restrictions; (b) on the application of a person who has made a request under subsection (6) where- (i) paragraph (b) of that subsection applies in respect of that request; and (ii) he has been served with a notice in writing under paragraph (b) (ii) of that subsection in respect of that request; or (iii) the period specified in that subsection has expired and neither of the events referred to in paragraph (b) of that subsection has occurred in respect of that request, order the sale of any shares to which that request relates and that they shall cease to be subject to any restrictions under subsection (3).

(8) Where the Monetary Authority has, by virtue of subsection (2) (a) (ii), served a notice in writing under subsection (3) on the person concerned and- (a) that person has, not later than 14 days after the service of that notice, served a notice in writing under section 70 (5) on the Monetary Authority in respect of the contravention of section 70 (3) to which that first-mentioned notice relates; and (b) either- (i) no notice of objection under section 70 (6) has been served by the Monetary Authority on that person in respect of that contravention within the period in respect of which section 70 (9) (b) permits such a notice of objection to be so served; or (ii) such a notice of objection has been so served within that period but an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is successful, whichever first occurs, the Monetary Authority shall forthwith serve a notice in writing on that person to the effect that the first-mentioned notice is revoked.

(9) The Monetary Authority shall not, by virtue of subsection (2) (a) (ii), make an application referred to in subsection (7) (a) unless- (a) the application relates to shares which are the subject of a notice in writing under subsection (3); and (b) the person upon whom that notice has been served has not, within 14 days after the service of that notice, served a notice in writing under section 70 (5) in respect of the contravention of section 70 (3) to which that first-mentioned notice relates: Provided that this subsection shall be without prejudice to the Monetary Authority's power, by virtue of subsection (2) (a) (iii), to subsequently make such an application in respect of those shares. (Amended 82 of 1992 s. 19) (10) Where an order has been made under subsection (7), the High Court may, on the application of the Monetary Authority, make such further order relating to the sale or transfer of the shares as it thinks fit.

(11) Where shares are sold pursuant to an order under this section, the proceeds of the sale, less the costs of the sale, shall be paid into court for the benefit of the persons beneficially interested in them, and any such person may apply to the High Court for an order that the whole or part of the proceeds be paid to him.

(12) This section shall apply- (a) to all the shares in the authorized institution concerned by virtue of which the person concerned is a minority shareholder controller of the institution which are held by him or any associate of his and were not so held immediately before he became such a controller; and (b) where the person concerned became a minority shareholder controller of the authorized institution concerned by virtue of the acquisition by him or any associate of his of shares in another company, to all the shares in that company which are held by him or any associate of his and were not so held immediately before he became such a controller.

(13) A copy of a notice in writing served under subsection (3) or (8) on the person concerned shall be served on the authorized institution or other company to whose shares it relates and, if it relates to shares held by any associate of that person, on that associate.

(14) The Chief Justice may make rules regulating the practice and procedure in connection with applications (including any class of applications) made under subsection (7).

(Added 95 of 1991 s. 18. Amended 82 of 1992 s. 25) 70C. Prohibition on certain persons acting as indirect controllers (1) In this section, "prohibited person", in relation to an authorized institution, means any person- (a) who has been served with a notice of objection under section 70 (6) in respect of his becoming or being, as the case may be, an indirect controller of the institution and either- (i) the period specified in the Administrative Appeals Rules (Cap. l sub. leg.) within which that person may appeal under section 70 (15) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful; or (b) who has been served with a notice of objection under section 70A (3) in respect of his being an indirect controller of the institution and either- (i) the period specified in the Administrative Appeals Rules (Cap. I sub. leg.) within which that person may appeal under section 70A (8) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70A (8) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful. (Amended 82 of 1992 s. 25) (2) No person who is a prohibited person in respect of an authorized institution shall act or continue to act, as the case may be, as an indirect controller of the institution and, accordingly, as such a controller shall not give or shall cease to give, as the case may be, any directions or instructions to the directors of the institution or of another company of which it is a subsidiary.

(3) Where any director of an authorized institution or of another company of which it is a subsidiary is given (whether directly or indirectly) any directions or instructions- (a) by a person whom the director knows, or ought reasonably to know, is a prohibited person in respect of the institution; and (b) which are, or might reasonably be construed as being, prohibited from being so given by virtue of subsection (2), the director shall forthwith notify the Monetary Authority of those directions or instructions and the circumstances in which they were so given. (Amended 82 of 1992 s. 25) (4) Any prohibited person who contravenes subsection (2) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 5 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(5) Any director who without reasonable excuse contravenes subsection (3) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(Added 95 of 1991 s. 18) 70D. Punishment for attempted evasion of restrictions (1) Any person who- (a) exercises or purports to exercise any right to dispose of any shares which, to his knowledge, are for the time being subject to any restrictions under section 70B (3) or of any right to be issued with any such shares; (b) votes in respect of any such shares (whether as holder or proxy), or appoints a proxy to vote in respect of them; (c) being the holder of any such shares, fails to notify of their being subject to those restrictions any person whom he does not know to be aware of that fact but does know to be entitled (apart from the restrictions) to vote in respect of those shares whether as holder or as proxy; or (d) being the holder of any such shares, or being entitled to any right to be issued with other shares in right of them, or to receive any payment on them (otherwise than in a liquidation), enters into any agreement which is void under section 70B (4) or (5), commits an offence and is liable- (i) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (ii) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(2) Where shares in an authorized institution or another company are issued in contravention of restrictions under section 70B (3), or payments are made by an authorized institution or another company in contravention of such restrictions, every director and every manager of the authorized institution or other company, as the case may be, who knowingly and wilfully permits such an issue of shares or the making of such a payment, as the case may be, commits an offence and is liable- (a) on conviction upon indictment to a fine of $200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $50,000 and to imprisonment for 6 months. (Added 95 of 1991 s. 18) 71. Chief executives and directors require Monetary Authority's approval (1) No person shall- (a) become the chief executive of an authorized institution, or a director of an authorized institution incorporated in Hong Kong, without the consent in writing of the Monetary Authority; or (Replaced 64 of 1987 s. 15) (b) if the becomes such chief executive or director without such consent, act or continue to act as such chief executive or director, as the case may be, without such consent, (Replaced 64 of 1987 s. 15) and for the purposes of this subsection consent may be given subject to such conditions as the Monetary Authority may think proper to attach thereto and shall be conveyed to the person, and the institution, concerned as soon as practicable.

(2) Where the Monetary Authority refuses to give consent under subsection (1), he shall notify the person concerned in writing of his refusal as soon as practicable.

(3) The Monetary Authority may by notice in writing to the person and the authorized institution concerned withdraw any consent given under subsection (1), or amend any condition attached to any such consent, if the Monetary Authority- (a) has given to the chief executive or director concerned not less than 7 days' advance notice of his intention to do so, specifying his reasons; and (b) has taken into account before so doing any written representation received by him from the chief executive or director concerned, and in any such case the chief executive or director concerned shall cease to act as such or, as the case may be, shall comply with the amended conditions. (Amended 64 of 1987 s. 15) (4) A person aggrieved- (a) by a refusal to grant consent, or by conditions attached to a consent, under subsection (1); (b) by the withdrawal of consent under subsection (3); or (c) by the amendment under subsection (3) of conditions attached to a consent, may appeal to the Governor in Council against the refusal, conditions, withdrawal or amendment, as the case may be, but such refusal, conditions, withdrawal or amendment shall take effect immediately notwithstanding that an appeal has been or may be made under this subsection. (Amended 64 of 1987 s. 15) (5) Any person who contravenes subsection (1) or (3) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(6) (a) A person shall not be regarded for the purposes of subsection (1) as becoming a director of an authorized institution if he is appointed to serve as a director of it immediately on the expiration of a previous term by him as a director.

(b) A person who is a director of an authorized institution immediately prior to the commencement of this Ordinance shall for the purposes of this section be regarded as having the consent of the Monetary Authority under subsection (1) to continue to act as director.

(c) A person who is the chief executive of an authorized institution immediately prior to the commencement of the Banking (Amendment) Ordinance 1987 (64 of 1987) shall for the purposes of this section be regarded as having the consent of the Monetary Authority under subsection (1) to continue to act as chief executive. (Added 64 of 1987 s. 15) (7) For the purposes of this section, where a person has the consent of the Monetary Authority under subsection (1) or by virtue of subsection (6) (c) to be or continue to act as the chief executive of an authorized institution, and is such chief executive, he is not required to have the consent of the Monetary Authority under subsection (1) to be or continue to act as a director of that institution. (Added 64 of 1987 s. 15) (Amended 95 of 1991 s. 19; 82 of 1992 s. 25) 72. (Repealed 95 of 1991 s. 20) 72A. Monetary Authority may require specified persons to submit information (1) For the purposes of this section, "specified person" means- (a) any person who proposes to become a controller of an authorized institution incorporated in Hong Kong; (Replaced 95 of 1991 s. 21) (b) any person who is the chief executive of an authorized institution; (c) any person who is a director or controller of an authorized institution incorporated in Hong Kong; or (Amended 95 of 1991 s. 21) (d) any person who is seeking the consent of the Monetary Authority under section 71 (1). (Amended 82 of 1992 s. 25) (2) The Monetary Authority may require a specified person to submit such information as he may reasonably require for the exercise of his functions under this Part and such information shall be submitted within such period and in such manner as the Monetary Authority may require. (Amended 82 of 1992 s. 25) (2A) Where an authorized institution becomes aware of the fact that any person has become or has ceased to be a specified person in respect of the institution, the institution shall, not later than 14 days after becoming aware of that fact, give notice in writing to the Monetary Authority of that fact. (Added 95 of 1991 s. 21. Amended 82 of 1992 s. 25) (3) Any specified person (other than a person referred to in subsection (1) (a) or (d) who fails without reasonable excuse to comply with any requirement under subsection (2) commits an offence and is liable- (Amended 95 of 1991 s. 21) (a) on conviction upon indictment to fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(4) Any specified person who signs any document for the purposes of complying with any requirement under subsection (2) which he knows or reasonably ought to know to be false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(5) Any specified person who produces any book, account, document, security or information for the purpose of complying with any requirement under subsection (2) which is false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(6) Every director and every manager of an authorized institution which contravenes subsection (2A) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Added 95 of 1991 s. 21) (Added 3 of 1990 s. 29) 73. Certain persons prohibited from acting as employees of authorized institutions except with consent of Monetary Authority (1) No person who- (a) is bankrupt or has entered into a composition with his creditors; (b) has been convicted in any place of an offence involving fraud or dishonesty; or (c) has been a director, or otherwise concerned in the management, of any authorized institution which has been wound up by a court or whose licence or registration, as the case may be, has been revoked, shall, without the consent in writing of the Monetary Authority, become an employee of an authorized institution or, if becoming such an employee without such consent, act, or continue to act, as such employee. (Amended 82 of 1992 s. 25) (2) Any person who contravenes this section commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 100,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

74. Appointment of chief executive (1) Every authorized institution shall appoint a chief executive, and not less than one alternate chief executive, of the institution, each of whom shall be- (a) an individual; and (b) ordinarily resident in Hong Kong, except that, in the case of an authorized institution incorporated outside Hong Kong, such chief executive and alternate chief executive are only required to be the chief executive or alternate chief executive, as the case may be, in respect of the business in Hong Kong of the institution.

(Amended 95 of 1991 s. 22) (1A) Where the chief executive of an authorized institution is precluded by illness, absence from Hong Kong or any other cause from carrying out his functions as the chief executive, an alternate chief executive of the institution shall act as such chief executive. (Added 95 of 1991 s. 22) (2) Every director and every manager or an authorized institution which contravenes subsection (1) commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Amended 95 of 1991 s. 22) PART XIV 75-78. (Repealed 95 of 1991 s. 23) PART XV LIMITATIONS ON LOANS BY AND INTERESTS OF AUTHORIZED INS- TITUTIONS 79. Interpretation and application (1) In this Part- "non-listed company" means a company not listed on the Unified Exchange: Provided that any public statutory corporation designated for the purposes of this definition by the Financial Secretary by notice in the Gazette shall be deemed not to be a non-listed company; "relative" means- (a) any ascendant or descendant, any spouse or former spouse of any such ascendant or descendant, and any parent, brother or sister of any such spouse or former spouse; (b) any brother or sister, aunt or uncle and any nephew or niece and any first cousin; (c) any spouse or former spouse, any ascendant of any such spouse or former spouse, and any brother or sister, aunt or uncle or nephew or niece and any first cousin of any such spouse or former spouse, and, for the purposes of this definition, any step-child shall be deemed to be the child of both its natural parent and of its step-parent and any adopted child to be the child of the adopting parent, and a spouse shall include anyone living as such; (Amended 95 of 1991. s. 24) "value" means- (a) in the case of shares in a company, the total of the current book value and the amount for the time being remaining unpaid on the shares; and (Amended 95 of 1991 s. 24) (b) in any other case, the current book value.

(2) For the purposes of this Part, the capital base of an authorized institution means the capital base of the institution as determined in accordance with the Third Schedule except that, for those purposes, any requirement under section 98 (2) referred to in that Schedule shall not apply in determining such capital base. (Replaced 95 of 1991 s. 24) (3) For the purposes of sections 83 and 85, "unsecured" means granted without security, or, in respect of any advance, loan or credit facility granted or financial guarantee or other liability incurred with security, any part thereof which at any time exceeds the market value of assets constituting that security; and "security" means such security as would, in the opinion of the Monetary Authority, be acceptable to a prudent banker. (Amended 95 of 1991 s. 24; 82 of 1992 s. 25) (4) In relation to any authorized institution incorporated outside Hong Kong, sections 80, 82, 85, 86 and, to the extent that it relates to such an institution, section 91 shall apply only to its principal place of business in Hong Kong and its local branches, and shall do so as if that principal place of business and those branches were collectively a separate authorized institution. (Amended 64 of 1987 s. 19; 95 of 1991 s.

24) 79A. Monetary Authority may require provisions of this Part to apply to certain authorized institutions on a consolidated basis (1) Subject to subsection (2), for the purposes of the application of any provision of this Part to an authorized institution incorporated in Hong Kong which has any subsidiary, the Monetary Authority may, by notice in writing to the institution, require the provision to apply to the institution- (a) on a consolidated basis instead of on an unconsolidated basis, or (b) on both a consolidated basis and an unconsolidated basis.

(2) The Monetary Authority may, in a notice under subsection (1) to an authorized institution, require the provision of this Part to which the notice relates to apply to the institution on a consolidated basis only in respect of such subsidiaries of the institution as are specified in the notice.

(3) No duty which a subsidiary of an authorized institution may be subject to shall be regarded as contravened by reason of the submission of information by the subsidiary to the institution for the purpose of enabling or assisting the institution to comply with a notice under subsection (1) to the institution.

(Added 95 of 1991 s. 25. Amended 82 of 1992 s. 25) 80. Advance against security of own shares, etc.

(1) An authorized institution shall not grant any advances, loans or credit facilities (including letters of credit), or give any financial guarantee or incur any other liability, against the security of its own shares. (Amended 95 of 1991 s. 26) (2) An authorized institution shall not, except with the approval in writing of the Monetary Authority, which approval shall be subject to such conditions as the Monetary Authority may think proper to attach thereto, grant any advances, loans or credit facilities (including letters of credit), or give any financial guarantee or incur any other liability, against the security of the shares of -(Amended 95 of 1991 s. 26; 82 of 1992 s. 25) (a) any holding company of the institution; (b) any subsidiary of the institution; or (c) any other subsidiary of any holding company of the institution.

(3) Every director and every manager of an authorized institution which contravenes subsection (1) or (2) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 100,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

81. Limitation on advances by authorized institutions (1) Subject to subsections (4), (5) and (6), the financial exposure of an authorized institution incorporated in Hong Kong to- (a) any one person; (b) two or more companies which- (i) are subsidiaries of the same holding company; or (ii) have the same controller (not being a company); (c) any holding company and one or more of its subsidiaries; or (d) any one person (not being a company) and one or more companies of which that person is a controller, shall not exceed an amount equivalent to 25% of the capital base of the institution.

(2) The financial exposure of an authorized institution to any person, company or combination thereof referred to in subsection (1) (a), (b), (c) or (d) shall, for the purposes of this section, be taken to be the aggregate of- (a) all advances, loans and credit facilities (including letters of credit) given to; (b) the value of the institution's holdings of shares and debentures (within the meaning of those terms in section 2 of the Companies Ordinance (Cap. 32) and other debt securities issued by; and (c) the principal amount, multiplied by the factor specified by the Monetary Authority pursuant to subsection (3) for items referred to in Table B of the Third Schedule in relation to the institution where, in respect of that institution, the other party is, that person, company or combination thereof, as the case may be.

(3) The Monetary Authority may, by notice in the Gazette, specify the factor for the purposes of subsection (2) (c), and any such notice may specify different factors for different items referred to in that subsection.
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