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SECURITIES ORDINANCE
SECURITIES ORDINANCE
(Amended 10 of 1989 s. 65)
58-59. (Repealed 10 of 1989 s. 65)
60. Exempt dealers
(1) The Commission may declare any person to be an exempt dealer for
the purposes of this Ordinance if it is satisfied that the business of
that person complies with the following requirement, that is to say-
(a) the main business of that person consists of one or both of the
following activities-
(i) carrying on some business other than the business of dealing in
securities;
(ii) dealing in securities in one or more of the ways specified in
subsection (2); and
(b) the greater part of any business of dealing in securities done by
him in Hong Kong, otherwise than in one of the ways specified in
subsection (2), is effected with or through the agency of one or more of
the following persons-
(i) a registered dealer;
(ii) an exempt dealer; or
(iii) a member of a stock exchange outside Hong Kong.
(2) The ways of dealing in securities referred to in subsection (1) are-
(a) issuing any document which is or is to be deemed to be a
prospectus within the meaning of the Companies Ordinance (Cap. 32) or
any prospectus approved by the Commission that is issued by a mutual
fund corporation or unit trust authorized by the Commission;
(b) making or offering to make with any person an agreement for or
with a view to the underwriting of securities by that person;
(c) making any invitation to persons to subscribe for securities or to
purchase securities on the first occasion that they are sold;
(d) making any invitation to persons to subscribe for or purchase
securities of the Government or the government of any country or
territory outside Hong Kong;
(e) effecting any transaction with a person whose business involves
the acquisition and disposal or the holding of securities, being a
transaction with that person as a principal.
(3) (Repealed 10 of 1989 s. 65)
(4) Without prejudice to subsection (1), the Commission may, by notice
in the Gazette, declare-
(a) any licensed bank;
(b) any trustee company registered under Part VIII of the Trustee
Ordinance (Cap. 29); or
(c) any person belonging to class of persons, or carrying on a type of
business, prescribed in regulations for the purposes of this paragraph,
to be an exempt dealer for the purposes of this Ordinance.
(5) The Commission may at any time revoke a declaration made under this
section.
(6) The Commission shall cause to be published in the Gazette at least
once in every year the names and addresses of all persons who are exempt
dealers. (Amended 10 of 1989 s. 65)
61. Exempt investment advisers
(1) The Commission may declare any person to be an exempt investment
adviser for the purposes of this Ordinance if it is satisfied that the
business of that person complies with the following requirements, that is
to say-
(a) the investment advice is given mainly to persons whose business
involves the acquisition and disposal or the holding of securities; or
(Amended 62 of 1976 s. 18)
(b) the investment advice is given only to persons residing outside
Hong Kong.
(2) The Commission may at any time revoke a declaration under
subsection (1). (Amended 10 of 1989 s. 65)
62. Offence to make a false representation for the purpose of
obtaining a certificate of registration under this Part
(1) Any person who for the purpose of obtaining a certificate of
registration under this Part, whether for himself or for any other
person, makes any representation, whether in writing, orally or
otherwise, which he knows to be false or misleading as to a material
particular shall be guilty of an offence, and shall be liable on
conviction on indictment, to imprisonment for 5 years.
(2) For the purposes of subsection (1), "representation" means a
representation-
(a) of a matter of fact, either present or past; or
(b) about a future event; or
(c) about an existing intention, opinion, belief, knowledge, or other
state of mind.
(3) Proceedings in respect of an offence against this section may be
brought at any time within 6 months of the discovery of the offence.
63. Information to be provided by registered person other than a
representative, etc.
(1) Every registered person other than a representative shall
forthwith notify the Commission in writing of any change which, while his
certificate of registration is in force, may occur- (Amended 58 of 1985 s.
16)
(a) in the address in Hong Kong at which he carries on the business of
dealing in securities or of investment adviser, as the case may be; or
(b) in any information supplied in or in connection with his
application for registration or renewal of registration, being
information prescribed by regulations.
(2) Every registered person other than a representative shall
forthwith, on ceasing to carry on business in Hong Kong as a dealer or
an investment adviser, notify the Commission in writing of that fact.
(Amended 58 of 1985 s. 16)
(3) If, at any time while a corporation is registered as a dealer or
investment adviser, any person becomes or ceases to be a director of the
corporation, the corporation shall within 7 days after that event notify
the Commission in writing of the name and address of that person and
also his nationality or the fact that he has no nationality.
(4) If, at any time while a person is registered as a dealer's
representative or investment representative, that person leaves or
enters the service of, or becomes or ceases to be an agent of, any
dealer or investment adviser, that person and the dealer or investment
adviser as the case may be, shall within 7 days after that event notify
the Commission in writing of the fact and of the name and address of the
dealer or investment adviser. (Amended 58 of 1985 s. 16)
(4A) Where-
(a) in any registered dealing partnership or registered investment
advisers' partnership-
(i) any partner ceases to be a partner or a further partner is
admitted to the partnership; or
(ii) any partner dies or becomes bankrupt or, being a corporation goes
into liquidation or is ordered to be wound up; or
(b) any registered dealing partnership or registered investment
advisers' partnership is dissolved by order of court,
the persons who were partners in such partnership immediately prior to
such event and, in the case of any person who is deceased, his personal
representative, shall forthwith notify the Commission in writing of the
fact. (Added 58 of 1985 s. 16)
(5) Any person who, without reasonable excuse, contravenes any of the
provisions of this section shall be guilty of an offence and shall be
liable on conviction to a fine of $ 2,000.
(Amended 10 of 1989 s. 65)
64. Commission to keep a register of dealers, etc.
(1) The Commission shall establish and maintain at its office -
(Amended 10 of 1989 s. 65)
(a) a register of dealers in which shall be entered the name of every
registered dealer and such other particulars as may be prescribed in
relation to registered dealers;
(b) a register of investment advisers in which shall be entered the
name of every registered investment adviser and such other particulars
as may be prescribed in relation to registered investment adviser;
(c) a register of dealers' representatives in which shall be entered
the name of every registered dealer's representative and such other
particulars as may be prescribed in relation to registered dealers'
representatives;
(d) a register of investment representatives in which shall be entered
the name of every registered investment representative and such other
particulars as may be prescribed in relation to registered investment
representatives; (Amended 58 of 1985 s. 17)
(e) a register of dealing partnerships in which shall be entered the
name of the partnership and of each partner thereof together with such
other particulars as may be prescribed in relation to registered dealing
partnerships; and (Added 58 of 1985 s. 17)
(f) a register of investment advisers' partnerships in which shall be
entered the name of the partnership and of each partner thereof together
with such other particulars as may be prescribed in relation to
registered investment advisers' partnerships. (Added 58 of 1985 s. 17)
(2) The registers kept under this section and, after registration or
renewal of registration, as the case may be, all applications made for
registration or renewal of registration under this Part shall, during
such hours as may be prescribed and on payment of any fee prescribed by
regulations, be open to inspection by members of the public.
(3) A copy of any extract of or entry in the registers kept under this
section, purporting to be certified by an authorized officer of the
Commission, shall be admissible as evidence in any legal proceedings,
whether under this Ordinance or otherwise. (Amended 10 of 1989 s. 65)
65. Publication of names of registered dealers, etc.
(1) The Commission shall cause to be published in the Gazette, at such
times and in such manner as it thinks proper, the names and addresses of
all persons who are registered under this Part, and also-
(a) in relation to any natural person who is so registered and in
relation to each general partner of a partnership which is so
registered, being a natural person, his nationality or, as the case may
be, that he has no nationality;
(b) in relation to each general partner of a partnership which is so
registered, his name and address; and
(c) in relation to any registered person who is a corporation, the
country where the corporation is domiciled or under the law of which the
corporation is incorporated. (Replaced 58 of 1985 s. 18)
(2) The information required by subsection (1) shall be published at
least once each year.
(3) If the Commission at any time amends any of the registers kept by
it under this Part by adding or removing the name of any person, it
shall cause particulars of the amendment to be published in the Gazette
within one month after making the amendment. (Amended 10 of 1989 s. 65)
PART VIA SPECIAL PROVISIONS RELATING TO DEALERS
65A. Qualifications for registration as a dealer
(1) No person, being an individual, may be registered as a dealer unless
he can show that-
(a) he has sufficient qualifications or experience in dealing in
securities;
(b) (Repealed 10 of 1989 s. 65)
(c) he is able to comply with the requirements of section 65B. (Added
58 of 1985 s. 50)
(2) No person shall be regarded as having sufficient qualifications or
experience for the purpose of subsection (1) (a) unless he has-
(a) not less than 3 years' experience in dealing in securities-
(i) in Hong Kong; or
(ii) on any other stock market recognized by the Commission for the
purposes of this paragraph by notice in the Gazette; or
(b) passed an examination approved for the purposes of this paragraph by
the Commission by notice in the Gazette.
(3) No corporation may be registered as a dealer unless-
(a) it is-
(i) a registered company; or
(ii) an overseas company to which Part XI of the Companies Ordinance
(Cap. 32) applies and which has complied with the provisions of that
Part relating to the registration of documents;
(b) every person who will be a dealing director is a registered
dealer, and
(c) it is able to comply with the requirements of section 65B. (Added 58
of 1985 s. 50)
(4) No partnership may be registered as a dealing partnership unless-
(a) all the partners, in the case of a general partnership; or
(b) all the general partners, in the case of a limited partnership,
are able to comply with the requirements of section 65B. (Added 58 of
1985 s. 50)
65B. Capital requirements for dealers
(1) A registered dealer shall provide and at all times maintain in his
business as a dealer-
(a) if he is a company, a net capital of not less than $ 5,000,000; or
(b) subject to subsection (2), in any other case a net capital of not
less than $ 1,000,000.
(2) A registered dealing partnership shall provide and at all times
maintain in their business as a dealer a net capital which in aggregate
amounts to not less than-
(a) $ 5,000,000 for each corporation which is a partner; and
(b) $ 1,000,000 for any other person who is a partner, being in either
case, a partner who is required by this Ordinance to be a registered
dealer.
(3) A registered dealer or dealing partnership shall at all times
maintain in his or their business as a dealer a liquidity margin of not
less than 10 per centum of the minimum net capital requirement specified
in subsections (1) and (2).
(4) Nothing in this section shall apply to a registered dealer who is
a dealing director.
(5) The Governor in Council may, by order in the Gazette, amend this
section by substituting for any amount or percentage specified therein
any other amount or percentage.
(6) For the purposes of this section-
"approved assets" and "ranking liabilities" means such assets and
liabilities as are specified to be approved assets and ranking
liabilities by the Commission by notice in the Gazette;
"liquid assets" means such of the approved assets as are specified as
liquid assets by the Commission by notice in the Gazette;
"liquidity margin" means the excess of liquid assets over ranking
liabilities;
"net capital" means the excess of approved assets over ranking
liabilities.
(7) Where under subsection (6) the Commission specifies any assets as
approved assets or liquid assets it may also specify the percentage of
the value of the assets that may be taken into account, or the
percentage of the minimum net capital or liquid assets that the assets
may comprise, in computing the net capital or the liquidity margin as
the case may be.
(8) (Repealed 63 of 1990 s. 4)
(Added 58 of 1985 s. 51)
65C. Failure to comply with section 65B
(1) If a registered dealer becomes aware of any inability by him or of
any registered dealing partnership of which he is a partner to comply with
section 65B he shall forthwith-
(a) notify the Commission thereof; and
(b) cease dealing in securities and cause any registered dealing
partnership of which he is a member so to cease, otherwise than for the
purpose of giving effect to any agreement or arrangement entered into
before the time when he becomes so aware.
(2) Where the Commission becomes aware of any inability by a
registered dealer or registered dealing partnership to comply with
section 65B it may, whether or not notice has been given under subsection
(1)-
(a) suspend the registration of the registered dealer or registered
dealing partnership pending consideration by it of the matter under
section 55 or the report of an auditor appointed under section 90; or
(b) (Repealed 63 of 1990 s. 4)
(3) A person shall be deemed to be aware of any such inability as is
described in subsection (1) if he would, with the exercise of reasonable
diligence, have been aware of such inability and, if such person is a
corporation, if any dealing director of that corporation is aware or
would, with the exercise of reasonable diligence, have been aware of
such inability.
(4) Any person who contravenes subsection (1) or who fails to comply
with any condition imposed by the Commission under subsection (2) (b)
shall be guilty of an offence and shall be liable on conviction to a
fine of $ 25,000 and, in the case of a continuing offence, to a further
fine of $ 250 for each day during which the offence continues. (Added 58
of 1985 s. 51)
65D. Books, accounts and records to be produced on demand
(1) For the purposes of ascertaining whether or not a registered
dealer of registered dealing partnership complies with section 65B the
Commission and any person who produces written authority in that behalf
signed by the Commission, shall have the powers of an auditor under
section 95 (1).
(2) For the purposes of section 95 (3) a request made under section 95
(1) by the Commission, or by any person authorized by it, in pursuance of
the powers vested in it or him, as the case may be, by subsection (1)
shall be deemed to have been made under section 95 (1).
(Added 58 of 1985 s. 51. Amended 10 of 1989 s. 65; L. N. 259 of 1989)
(Part VIA added 58 of 1985 s. 19)
PART VII RECORDS
66. Application of Part VII
(1) This Part applies to and in relation to -
(a) a person who is-
(i) a dealer;
(ii) a dealer's representative;
(iii) an investment adviser; or
(iv) an investment representative; and
(b) securities listed on the Unified Exchange and any other securities
of a class prescribed in regulations for the purposes of this
subsection. (Amended 58 of 1985 s. 52)
(2) The Governor in Council may, by order, apply any of the provisions
of this Part, with such modifications and additions as he thinks fit, to
financial journalists.
(3) For the purposes of subsection (2) "financial journalist" means a
person who, in the course of his business or employment, contributes
advice concerning securities for publication in a newspaper, magazine,
journal, or other periodical publication.
67. Certain persons to maintain registers of securities
(1) A person to whom this Part applies shall maintain a register of
the securities in which he has an interest and of the particulars
relating to their acquisition and disposal in a manner and form approved
by the Commission. (Amended 10 of 1989 s. 65)
(2) Particulars of the securities in which a person to whom this Part
applies has an interest and particulars of his interest in those
securities shall be entered by that person in the register within 14
days after he becomes aware of the acquisition of the interest or after
the commencement of this section, whichever is the later.
(3) Where there is a change (not being a change prescribed by
regulations) in the interest or interests in securities of a person to
whom this Part applies, he shall, within 14 days after he becomes aware
of the change, enter in the register full particulars of the change,
including the date when the change occurred and the circumstances by
reason of which the change occurred.
(4) For the purposes of this section, where a person acquires or
disposes of securities there shall be deemed to be a change in the
interest or interests of that person.
(4A) Where a person to whom this Part applies is a registered dealer who
is a partner in a registered dealing partnership or a registered
investment adviser in a registered investment advisers' partnership it
shall be sufficient compliance with this section if the register required
to be maintained by this section is maintained by the partnership in
relation to all the partners of the partnership who are registered dealers
of registered investment advisers. (Added 58 of 1985 s. 20)
(5) A person who contravenes any provision of this section that is
applicable to him shall be guilty of an offence and shall be liable on
conviction to a fine of $ 5,000.
68. Certain notices to be given to the Commission
(1) A person to whom this Part applies shall notify in writing to the
Commission the place at which he keeps or intends to keep the register
of his interests in securities: (Replaced 62 of 1976 s. 19. Amended 58
of 1985 s. 21)
Provided that where the person to whom this Part applies is a
registered dealer who is a partner in a registered dealing partnership
or a registered investment adviser in a registered investment advisers'
partnership such notice may be given by the partnership or any partner
thereof on behalf of such person, and if such partnership or partner does
so, such notice shall, for the purposes of this section, be deemed to have
been given by that person. (Added 58 of 1985 s. 21)
(2) Notice under subsection (1) shall be given-
(a) if the person is a person to whom this Part applies at the
commencement of this section, within one month after that date; or
(b) in any other case, in or as part of the person's application for
registration under this Ordinance.
(3) A notice under paragraph (a) of subsection (2) shall be given as
provided in that paragraph notwithstanding that the person has ceased to
be a person to whom this Part applies before the expiration of the
appropriate time referred to in that paragraph.
(4) A person to whom this Part applies shall keep the register of his
interests in securities at the place specified in the notice given under
subsection (1) unless he gives a subsequent notice to the Commission in
the form prescribed by regulations to the effect that the register is
kept at some other place specified in the subsequent notice, in which case
he shall keep the register-
(a) where only one such subsequent notice has been given, at the other
place specified in that notice; or
(b) where more than one such subsequent notice has been given, at the
other place specified in the later or latest of those notices.
(5) A person who ceases to be a person to whom this Part applies shall
give notice in the form prescribed by regulations to the Commission of
that fact within 14 days thereafter.
(6) A person who contravenes any provision of this section that is
applicable to him shall be guilty of an offence and shall be liable on
conviction to a fine of $ 2,000. (Amended 10 of 1989 s. 65).
69. Defences
(1) It shall be a defence to a prosecution for contravening any
provision of section 67 (5) or 68 (6) if the defendant proves that the
contravention was due to his not being aware of a fact or occurrence the
existence of which was necessary to constitute the offence.
(2) For the purposes of this Part, a person shall, in the absence of
proof to the contrary, be presumed to have been aware at a particular
time of a fact or occurrence relating to securities of which a servant
or agent of the person, being a servant or agent having duties or acting
in relation to his employer's or principal's interest in the relevant
securities, was aware at that time.
70. Power of Commission to require certain information to be supplied
to him
The Commission may require a person to whom this Part applies to
produce for inspection the register required to be kept pursuant to
section 67, and the Commission may make copies of or take extracts from
the register. (Amended 10 of 1989 s. 65)
71. Power of Commission to supply copy of register
The Commission may supply a copy of any such register, or a copy of an
extract from it, to the Attorney General, who may, if he has reason to
believe that an offence under this Ordinance may have been committed,
deliver the copy to any person whom he thinks fit for the purposes of an
investigation or a prosecution of the offence. (Amended 10 of 1989 s.
65)
PART VIII TRADING IN SECURITIES
72. Offers by dealers
(1) A dealer shall not in Hong Kong communicate an offer to acquire or
dispose of securities of a corporation unless-
(a) the offer-
(i) is written in the English or Chinese language; or
(ii) if communicated verbally, is reduced to writing in the English or
Chinese language and delivered to the person or persons to whom it was
made not later than 24 hours after the verbal communication; and
(b) the offer-
(i) specifies the name and address of the offeror and, if any person
is making the offer on behalf of the offeror, the name and address of
that person;
(ii) contains a description of securities sufficient to identify them;
(iii) specifies the terms of the offer (including where appropriate
the amount of consideration proposed to be paid for securities acquired
pursuant to the offer);
(iv) where a dividend has been declared or recommended in respect of
the securities, or it is anticipated that a dividend will be so declared
or recommended before the transfer of the securities, states whether the
securities are to be transferred with or without that dividend;
(v) specifies whether, in the event of a person accepting the offer,
the offeror will pay any stamp duty which that person will become liable
to pay in respect of the contract note as a result of the transaction;
(vi) bears a date which is not more than 3 days before the date on
which the offer is communicated;
(vii) if the offer relates to the acquisition of securities, satisfies
the requirements of Schedule 1;
(viii) if the offer relates to the disposal of securities satisfies
the requirements of Schedule 2;
(ix) where a report of an expert in connection with the offer is
included in or annexed to the offer, contains a statement to the effect
that the expert has consented to the inclusion or annexure, and has not,
before the communication of the offer, withdrawn that consent;
(c) the offer includes a translation, as the case requires, in the
Chinese or English language of all the particulars required under
paragraph (b), except where the Commission has previously agreed that
the requirements of this paragraph may be dispensed with in any
particular case. (Amended 10 of 1989 s. 65)
(2) A document containing an offer to which subsection (1) relates
which includes a statement purporting to be made by an expert shall not
be communicated unless the expert has given and has not, before
communication of a copy of the offer, withdrawn his written consent to
the communication of the offer with the inclusion of the statement in
the form and context in which it is included.
(3) Subject to subsection (5), any dealer who communicates an offer
for the acquisition or disposal of securities without having complied
with subsections (1) and (2) shall be guilty of an offence and shall be
liable on conviction to a fine of $ 10,000.
(4) Where any person has accepted an offer for the disposal or
acquisition of securities under this section and the offer has been made
without the requirements of subsections (1) and (2) having been complied
with in a material particular, that person may, subject to the rights of
any bona fide purchaser of the securities for value, rescind the
acceptance, by notice in writing, within 14 days after the date of the
acceptance. (Replaced 62 of 1976 s. 20)
(5) Without prejudice to the provisions of section 3, this section does
not apply to -
(a) any offer to dispose of securities of a corporation to persons who
already hold securities of that corporation;
(b) any offer by a dealer if the offer is made to a person with whom,
or on whose behalf, the dealer has transacted the sale or purchase of
securities on at least 3 occasions during the period of 3 years
immediately preceding the offer;
(c) any offer made to-
(i) a person whose business involves the acquisition or disposal or
holding of securities; or
(ii) a solicitor or professional accountant; or
(iii) any other person who belongs to a class of persons prescribed in
regulations for the purposes of this paragraph; or (Amended 62 of 1976
s. 20)
(d) any offer made by a stockbroker in the ordinary course of trading
on the Unified Exchange. (Amended 58 of 1985 s. 53)
(6) Where a dealer communicates an invitation which invites a person
to acquire or dispose of any security held by that person in a
corporation, then for the purposes of this section-
(a) that invitation is deemed to be an offer; and
(b) an offer to acquire or dispose of that security made by that
person in response to the invitation is deemed to be an acceptance by
that person of an offer to acquire or, as the case may be, an offer to
dispose of the security,
and references in this section to "acceptance" shall be construed
accordingly.
(7) An offer to acquire or dispose of a right to acquire or dispose of
a security or an interest in a security is deemed to be an offer to
acquire or dispose of a security; and a reference to a person who holds
securities includes a reference to a person who holds a right to acquire
a security or an interest in a security.
(8) For the purposes of this section "expert" includes an engineer,
valuer, professional accountant, and solicitor, and any other person whose
profession gives authority to a statement made by him.
(9) For the purposes of this section an offer to acquire or dispose of
securities in consideration or part consideration for other securities
is deemed to be both an offer to acquire and an offer to dispose of
securities.
73. Calls by registered dealers
(1) Subject to subsection (3), a dealer shall not during, or as a
consequence of, a call on any person, whether at his place of residence or
his place of employment or otherwise, enter into any contract for the sale
of securities unless he-
(a) calls on the person at the invitation of that person; and
(b) before entering into the contract provides the person with a
written statement containing all the information which he would have
been required to give to that person if the contract had been entered
into as a result of an offer made under section 72.
(2) Any dealer who contravenes subsection (1) shall be guilty of an
offence and shall be liable on conviction to a fine of $ 10,000 and to
imprisonment for 2 years.
(3) Subsection (1) does not apply to -
(a) any contract for the sale of securities of a corporation with a
person who already holds securities of that corporation;
(b) any contract for the sale of securities by a dealer with a person
with whom the dealer has transacted the sale or purchase of securities
on at least 3 occasions during the period of 3 years immediately
preceding the date of the contract; or
(c) any contract for the sale of securities with-
(i) a person whose business involves the acquisition or disposal or
holding of securities;
(ii) a solicitor or professional accountant;
(iii) any other person who belongs to a class of persons prescribed in
regulations for the purpose of this paragraph.
(4) Where any contract for the sale of securities is entered into in
contravention of subsection (1), the purchaser may, subject to the
rights of any bona fide purchaser of the securities for value, rescind
the contract by giving notice in writing to the seller within 28 days
after the date on which the contract was entered into.
(5) In this section "call" includes a visit in person and a
communication by telephone.
74. Hawking of securities
(1) Subject to subsections (2) and (3), a person shall not, whether on
his own behalf or otherwise and whether by appointment or otherwise, call
from place to place-
(a) making or offering to make with any person-
(i) an agreement for or with a view to having that other person
purchase specific securities; or
(ii) an agreement the purpose or pretended purpose of which is to
secure a profit to that other person from the yield of specific
securities or by reference to fluctuations in the value of specific
securities; or
(b) inducing or attempting to induce any other person to enter into an
agreement of the type referred to in paragraph (a) (i) or (ii), whether
or not in calling from place to place he does any other act or thing.
(2) Subsection (1) does not apply to-
(a) a person in so far as -
(i) he calls at the place of another person who is a banker,
solicitor, professional accountant, registered or exempt dealer,
registered or exempt investment adviser or registered dealer's
representative or registered investment representative; and
(ii) whether as principal or agent, he makes, or offers to make, with
that other person an agreement referred to in subsection (1) or induces,
or attempts to induce, that other person to enter into such an
agreement; or
(b) any other person calling from place to place who belongs to a
class of persons prescribed in regulations for the purpose of this
subsection. (Replaced 62 of 1976 s. 21)
(3) Nothing in this section applies to securities or any class of
securities which have been exempted by the Commission for the purposes
of this section provided that any conditions subject to which the
exemption was granted have been fulfilled.
(4) Any person who contravenes subsection (1) shall be guilty of an
offence and shall be liable on conviction to a fine of $ 50,000 and to
imprisonment for 2 years.
(5) If in any proceedings for an offence against subsection (4) it is
proved that the accused did any of the acts mentioned in subsection (1)
(a) or (b) on 2 or more occasions within any period of 14 days, he
shall, until the contrary is proved, be deemed to have been calling from
place to place.
(6) In this section "to call" includes to visit in person and to
communicate by telephone.
75. Issue of contract notes
(1) Every dealer (including an exempt dealer) shall, in respect of
every contract (other than a market contract) for the purchase, sale, or
exchange of securities entered into by him in Hong Kong (whether as
principal or agent), not later than end of the next trading day after
the contract was entered into, make out a contract note which complies
with subsection (2) and - (Amended 68 of 1992 s. 20)
(a) where the contract was entered into as agent, deliver the contract
note to the person on whose behalf he entered into the contract; or
(b) where the contract was entered into as principal, retain the
contract note for himself.
(2) A contract note made out by a dealer under subsection (1) shall
include-
(a) the name or style under which the dealer carries on his business
as a dealer and the address of the principal place at which he so
carries on business;
(b) where the dealer is acting as principal, a statement that he is so
acting;
(c) the name of the person (if any) to whom the dealer is required to
give the contract note;
(d) the date of the contract, and the date on which the contract note
is made out;
(e) the quantity and description of the securities that are being
acquired or disposed of;
(f) except in the case of an exchange, the price per unit of the
securities;
(g) the amount of consideration payable under the contract or, in the
case of an exchange, particulars of the securities exchanged sufficient
to identify them;
(h) the rate or amount of Commission (if any) payable in respect of
the contract;
(i) the amount of stamp duty (if any) payable in connection with the
contract and, where applicable, in respect of the transfer;
(j) the date of settlement.
(3) Any dealer (including an exempt dealer) who completes a contract
for the purchase, sale, or exchange of securities without having
complied with subsection (1) shall be guilty of an offence and shall be
liable on conviction to a fine of $ 5,000.
76. Dealers not to engage in option or forward trading
(1) Except as provided in regulations, a dealer (including an exempt
dealer) shall not transact in Hong Kong, or hold himself out as being
prepared to transact in Hong Kong -
(a) any dealing whereby the dealer confers on any person an option to
purchase from or sell to the dealer any securities listed on the Unified
Exchange; or (Amended 58 of 1985 s. 54)
(b) any dealing in any such securities which is completed later than
the end of the next trading day after the dealing was entered into.
(2) Any dealer who contravenes subsection (1) shall, subject to
subsection (3), be guilty of an offence and shall be liable on
conviction to a fine of $ 5,000.
(3) It shall be a defence to any criminal proceedings brought under
subsection (2) in respect of a dealing mentioned in paragraph (b) of
subsection (1) for the accused to prove that he took all reasonable and
practicable steps to secure completion of the transaction within the
period permitted by that paragraph.
(4) A contract entered into in contravention of subsection (1) shall
not be enforceable by either the dealer or the other contracting party.
77. Dealers to provide certain information, etc. to client
(1) Subject to subsection (2), every dealer (including an exempt
dealer) shall, on being requested to do so by any person on whose behalf
he has transacted a dealing in securities-
(a) provide that person with a copy of the contract note relating to
the dealing, and a copy of his account with the dealer; and
(b) if the Commission on the application of the person so directs,
make available for inspection by that person, at all reasonable times
during the dealer's ordinary hours of business, the dealer's copy of the
contract note and the person's account with the dealer. (Amended 10 of
1989 s. 65)
(2) Subsection (1) does not require a dealer (including an exempt
dealer) to-
(a) provide, or keep available for inspection, a copy of any contract
note which relates to a dealing transacted more than 2 years before the
date of the request; or
(b) provide a copy of, or keep available for inspection, any account
which relates to a dealing transacted more than 6 years before the date
of the request.
(3) Any such dealer may impose a charge not exceeding an amount
prescribed by regulations for a copy of a document provided pursuant to
subsection (1).
(4) Any dealer who, without reasonable excuse, fails to comply with
subsection (1) shall be guilty of an offence and shall be liable on
conviction to a fine of $ 2,000.
78. Certain representations prohibited
(1) A registered person shall not in any communication, whether
written or oral, represent or imply or knowingly permit to be
represented or implied in any manner to a person that the abilities or
qualifications of the registered person have in any respect been approved
by the Hong Kong Government, the Commission. (Amended 10 of 1989 s. 65)
(2) A statement made to the effect that a person is registered under
this Ordinance or is the holder of a certificate of registration is not
a contravention of subsection (1).
(3) Any registered person who, without reasonable excuse, contravenes
subsection (1) shall be guilty of an offence and shall be liable on
conviction to a fine of $ 2,000.
79. Disclosure of certain interests
(1) Where, in a circular or other written communication issued in Hong
Kong by him to more than one person, a dealer or an investment adviser
(including an exempt dealer or exempt investment adviser) makes a
recommendation, whether expressly or by implication, with respect to any
securities or any class of securities of a corporation, he shall include
in the circular or other communication, in type not less hold and not
less legible than that used in its text, a statement as to whether or
not he has, at the date specified in the circular or communication
pursuant to subsection (5), an interest in any of the securities of that
corporation.
(2) Subsection (1) does not require in the case of a circular or other
written communication issued by a stockbroker the inclusion of a
statement in relation to an interest that consists of the right to
charge Commission as provided by the rules of the Exchange Company on
the sale or purchase of the securities or class of securities that are
being recommended. (Amended 58 of 1985 s. 55)
(3) For the purposes of subsection (1), a person who has entered into
an underwriting agreement in respect of any securities shall be deemed
to have a financial interest in the sale or purchase of those
securities.
(4) Where an offer to the public of securities is not fully
subscribed, a person who has subscribed for or taken up, or is required
to subscribe for or take up, any of those securities under an
underwriting agreement shall not, during the period of 90 days after the
close of the offer, make any offer or recommendation in respect of those
securities unless the offer or recommendation contains or is accompanied
by a statement to the effect that the offer or recommendation relates to
securities that he has acquired, or is or will be required to acquire,
under an underwriting agreement as a result of the offer to the public
not being fully subscribed.
(5) Every circular or other written communication to which this
section relates shall be dated and shall contain on its face the name of
the dealer or investment adviser who issued it.
(6) A dealer or investment adviser who issues a circular or
communication to which this section relates shall retain a copy of it
bearing his signature in such manner, and for such time or until the
happening of such event, as may be prescribed by regulations.
(7) For the purposes of this section, a circular or other written
communication shall be deemed to have been issued by the person whose
name is contained on its face.
(8) In this section a reference to securities does not include a
reference to the stock or debentures of, or bonds made available by, a
government or a local government authority, or to securities guaranteed
by a government or a local government authority.
(9) Without prejudice to the power to make regulations under section
146, regulations may be made under that section-
(a) requiring the lodging with the Commission of copies of any circular
or other written communication issued by a dealer or investment adviser;
and (Amended 10 of 1989 s. 65)
(b) making provision for or with respect to the keeping of records of
circulars or other similar written communications issued by a dealer or by
an investment adviser. (10) Any dealer or investment adviser, whether
registered or exempted from registration, who-
(a) issues a circular or other written communication in contravention of
subsection (1) or (5);
(b) contravenes subsection (4); or
(c) fails to retain a copy of a circular or other written communication
as required by subsection (6), shall be guilty of an offence and shall be
liable on conviction to a fine of $ 5,000.
(11) An offence against subsection (10) is not committed by reason only
that a circular or other written communication is issued to a person whose
business involves the acquisition, disposal, or holding of securities.
80. Short selling prohibited
(1) A person shall not sell securities at or through the Unified
Exchange unless, at the time he sells them- (Amended 58 of 1985 s. 56)
(a) he has or, where he is selling as agent, his principal has; or
(b) he reasonably and honestly believes that he has or, where he is
selling as agent, that his principal has,
a presently exercisable and unconditional right to vest the securities in
the purchaser of them.
(2) Any person who contravenes subsection (1) shall be guilty of an
offence and shall be liable on conviction to a fine of $ 10,000 and to
imprisonment for 6 months. (Amended L. N. 57 of 1988)
(3) For the purposes of subsection (1) -
(a) a person shall be deemed to be selling securities if he-
(i) purports to sell the securities;
(ii) offers to sell the securities;
(iii) holds himself out as entitled to sell the securities; or
(iv) instructs a dealer to sell the securities;
(b) a person who, at a particular time, has a presently exercisable and
unconditional right to have securities vested in him or in accordance with
his directions shall be deemed to have at that time a presently
exercisable and unconditional right to vest the securities in a purchaser
of them; and
(c) a right of a person to vest securities in a purchaser thereof shall
not be deemed not to be unconditional by reason only of the fact that the
securities are charged or pledged in favour of some other person to secure
the repayment of money.
(4) Subsection (1) does not apply to or in relation to-
(a) a person acting in good faith in the reasonable and honest belief
that he has a right, title, or interest to or in securities that he
purports to sell, offers for sale, or holds himself out as capable of
selling;
(b) a dealer acting in good faith for or on behalf of some other person
in the reasonable and honest belief that such other person has a right,
title, or interest to or in securities that he purports to sell, offers
for sale, or holds himself out as capable of selling;
(c) a sale of securities by a stockbroker acting as principal when he
acts as an odd lot specialist in accordance with the rules of the Exchange
Company, being a sale made solely for the purpose of - (Amended 58 of 1985
s. 56)
(i) accepting an offer to purchase an odd lot of securities; or
(ii) disposing of a parcel of securities that is less than one board lot
of securities, by means of the sale of one board lot of those securities;
or (Amended L. N. 57 of 1988)
(d) a sale of securities falling within a class of transaction
prescribed by regulations for the purposes of this paragraph.
81. Disposition of security documents
(1) Where securities that are not the property of a dealer (including an
exempt dealer) and for which the dealer, or any nominee controlled by the
dealer, is accountable are held for safe custody in Hong Kong, the dealer
shall, subject to subsection (2), either cause the securities-
(a) (not being bearer securities) to be registered as soon as
practicable in the name of the person to whom the dealer or nominee is
accountable or in the name of the dealer's nominee; or
(b) to be deposited in safe custody in a designated account with the
dealer's bankers or with any other institution which provides facilities
for the safe custody of documents to the satisfaction of the Commission.
(2) (Repealed 63 of 1990 s. 4)
(3) No dealer shall, without the specific authority in writing of the
person to whom he is accountable, deposit any securities of which the
dealer is not the owner as security for loans or advances made to the
dealer or lend or otherwise part with the possession of any such
securities for any purpose. (Replaced 62 of 1976 s. 22)
(4) An authority conferred under subsection (3) shall specify the period
for which it is current, but shall not in any event, subject to subsection
(5), remain in force for a period of more than 12 months.
(5) An authority conferred under subsection (3) may be renewed in writing
for one or more further periods not exceeding 12 months at any one time.
(6) Any dealer who, without lawful authority or reasonable excuse,
contravenes subsection (1) or (3) shall be guilty of an offence.
(7) Any person guilty of an offence under subsection (6) shall be liable
on conviction-
(a) in the case of a contravention of subsection (1), to a fine of
$ 2,000; and (b) in the case of a contravention of subsection (3), to a
fine of $ 20,000 and to imprisonment for 2 years.
(Amended 10 of 1989 s. 65)
PART IX ACCOUNTS AND AUDIT
82. Application and interpretation of Part IX
(1) This Part applies to the business of a registered dealer, other than
a registered dealer who is a director of a corporation when acting for or
on behalf of the corporation in its business of dealing in securities; and
every reference in this Part to the term "dealer" shall be construed
accordingly. (Replaced 62 of 1976 s. 23)
(2) In this Part, unless the context otherwise requires, any reference
to the books, accounts, records, securities, trust accounts, or business
of, or in relation to, a dealer who carries on business in partnership
shall be read and construed as a reference to the books, accounts,
records, securities, trust accounts, or business (as the case requires) of
or in relation to the partnership.
(2A) Any obligation imposed by this Part on a dealer shall, where a
dealer is a partner in a dealing partnership, be deemed to be imposed on
the partnership; and all the partners of the partnership, if it is a
general partnership, and all the general partners of a limited partnership
shall jointly and severally be responsible for the performance of that
duty. (Added 58 of 1985 s. 22)
(3) The Governor in Council may, by order published in the Gazette,
apply all or any of the provisions of this Part, with or without
modifications, to registered investment advisers.
83. Accounts to be kept by dealers
(1) A dealer shall-
(a) cause to be kept such accounting and other records as will
sufficiently explain the transactions, and reflect the financial position,
of the business of dealing in securities carried on by him, and will
enable true and fair profit and loss accounts and balance sheets to be
prepared from time to time; and
(b) cause those records to be kept in such a manner as will enable them
to be conveniently and properly audited.
(2) The records referred to in subsection (1) shall be kept-
(a) in writing in the English language; or
(b) in such a manner as to enable them to be readily accessible and
readily converted into written form in the English language.
(3) Without affecting the generality of subsection (1), a dealer shall
cause records to be kept-
(a) in sufficient detail to show particulars of-
(i) all money received and paid by the dealer, including money paid to,
and disbursed from, a trust account;
(ii) all purchases and sales of securities made by the dealer, the
charges and credits arising from them, and the names of the buyer and
seller, respectively, of each of those securities;
(iii) all income received from commissions, interest, and other sources,
and all expenses, commissions, and interest paid by the dealer;
(iv) all the assets and liabilities (including contingent liabilities)
of the dealer;
(v) all securities that are the property of the dealer, showing by whom
the security documents are held and, where they are held by some other
person, whether or not they are held as security against loans or
advances;
(vi) all securities that are not the property of the dealer and for
which the dealer or any nominee controlled by the dealer is accountable,
showing by whom, and for whom, the security, documents are held
distinguishing those which are held for safe custody, and those which are
deposited with a third party whether as security for loans or advances
made to the dealer or any related corporation or for any other purposes;
and (Amended 62 of 1976 s. 24)
(vii) all underwriting and sub-underwriting transactions entered into by
the dealer; and (b) containing copies of acknowledgements of the receipt
of securities received by the dealer from or on behalf of clicnts, clearly
identifying in respect of each receipt of securities the client and the
securities. (Amended 62 of 1976 s. 24)
(4) Without prejudice to subsection (3), a dealer shall keep records in
sufficient details to show separately particulars of all transactions by
the dealer with, or for the account of-
(a) clients of the dealer; and
(b) the dealer himself. (Replaced 62 of 1976 s. 24)
(4A) Without affecting the generality of subsections (1) and (3) and
subject to regulations under section 146, the dealer shall cause records
to be kept which are sufficient to readily establish whether or not
section 65B has been complied with. (Added 58 of 1985 s. 57)
(5) A dealer shall retain-
(a) for a period of not less than 6 years, the records referred to in
subsection (1); and
(b) for a period of not less than 2 years-
(i) each contract note received by him or made out to himself as
principal; and
(ii) a copy of each contract note made out by him as agent.
(6) An entry in the accounting and other records of a dealer kept in
accordance with this section shall be deemed to have been made by, or with
the authority of, the dealer.
(7) Where matter that is intended to be used in connection with the
keeping of a record referred to in this section is recorded or stored by
means of a mechanical device, an electronic device, or any other device in
an illegible form, a person who wilfully-
(a) records or stores in that device matter that he knows to be false or
misleading in a material particular;
(b) destroys, removes, or falsifies matter that is recorded or stored in
that device; or
(c) fails to record or store matter in that device with intent to
falsify any entry made or intended to be complied, wholly or in part, from
that matter, shall be guilty of an offence and shall be liable on
conviction to a fine of $ 10,000 and to imprisonment for 6 months.
(8) For the purposes of this section, a record required to be kept by a
dealer may be kept either by making entries in a bound book or by
recording the relevant matters in any other manner.
(9) Where a record required by this section to be kept is not kept by
making entries in a bound book but by some other means, the dealer shall
take reasonable precautions for guarding against falsification and for
facilitating discovery of any falsification. (10) Notwithstanding any
other provision of this section, a dealer shall not be deemed to have
failed to keep a record referred to in subsection (1) by reason, only that
the record is kept as a part of, or in conjunction with, the records
relating to any business other than dealing in securities that is earried
on by him.
84. Certain money received by dealer to be paid into a trust account
(1) A dealer shall establish and keep at a licensed bank one or more trust
accounts designated or evidenced as such into which he shall pay-
(a) all amounts (less brokerage and other proper charges) which are
received for or on account of any person (other than a stockbroker) from
the sale of securities, except those amounts paid to that person or in
accordance with his directions within 4 bank trading days after their
receipt;
(b) all amounts (less any brokerage and other proper charges) which are
received from or on account of any person (other than a stockbroker) for
the purchase of securities, except those amounts attributable to the
purchase of securities which are delivered to the dealer within 4 bank
trading days after receipt of the amounts; and (c) subject to any
agreement to the contrary, all amounts derived by way of interest from the
retention in a trust account of any amount mentioned in paragraph (a) or
(b). (2) All amounts required to be paid into a trust account under
subsection (1) shall be retained there by the dealer until they are paid
to the person on whose behalf they are being held or in accordance with
his directions or, as the case may be, until they are required to complete
payment in respect of the purchase of securities on behalf of any such
person.
(3) Money required by this section to be paid into a trust account shall
be so paid within 4 bank trading days after it is received by the dealer.
(4) All sums derived by way of interest from the payment of money by a
dealer into a trust account under this section shall, subject to any
agreement to the contrary, belong to the person to whom the dealer is
accountable.
(5) No amount other than an amount referred to in subsection (1) (a) or
(b) shall be paid into a trust account.
(6) Every dealer shall keep records of-
(a) all amounts paid into a trust account kept by him, specifying the
persons on whose behalf the amounts are held and the dates on which they
were paid into the account; (b) all withdrawals from the trust account,
the dates of those withdrawals, and the names of the persons on whose
behalf the withdrawals are made; and
(c) such other particulars (if any) as may be prescribed by regulations.
(7) A person who-
(a) without reasonable excuse, contravenes any provision of this section
shall be guilty of an offence and shall be liable on conviction to a fine
of $ 10,000; or (b) with intent to defraud, contravenes any provision of
this section shall be guilty of an offence and shall be liable on
conviction on indictment to a fine of $ 50,000 and to imprisonment for 5
years.
85. Money in trust account not available for payment of debts, etc.
(1) Except as otherwise provided in this Part, money held in a trust
account shall not be available for payment of the debts of a dealer or be
liable to be paid or taken in execution under the order or process of any
court of competent jurisdiction. (2) Any payment made in contravention of
subsection (1) shall be void ab inito, and no person to whom the money is
paid shall obtain any title to it.
86. Claims and liens not affected
Nothing in this Part shall be construed as taking away or affecting any
lawful claim or lien which any person has in respect of any money held in
a trust account or in respect of any money held in a trust account or in
respect of any money received for the purchase of securities or from the
sale of securities before the money is paid into a trust account.
87. Dealer to appoint auditor
(1) A dealer shall appoint an auditor to audit his accounts (including all
trust accounts required to be kept by the dealer under section 84) and,
where for any reason the auditor ceases to act for the dealer, the dealer
shall, as soon as practicable thereafter, appoint another auditor to
replace him.
(2) A person is not eligible for appointment under subsection (1) if-
(a) he is a servant of the dealer or is in the employment of any such
servant; (b) where the dealer is a partnership, he is a member of the
partnership or in the employment of any such member;
(c) where the dealer is a corporation, he is an officer of the corporation
or is in the employment of any such officer; or
(d) he belongs to any other class of persons prescribed in regulations for
the purposes of this paragraph.
87A. Dealer's financial year
(1) A dealer shall-
(a) within 1 month after the date on which this section commences; or
(b) if he is not registered at that date, within 1 month after the issue
to him of a certificate of registration under section 51,
notify the Commission in writing of the date on which his financial year
ends. (2) On application in writing by a dealer, the Commission may,
subject to such conditions as it thinks fit, grant permission to the
dealer to alter his financial year. (3) Except with the written
permission of the Commission, the period of a dealer's financial year
shall not exceed 12 months.
(4) Nothing in this section shall prejudice the operation of section 122
of the Companies Ordinance (Cap. 32).
(Added 62 of 1976 s. 25)
87B. Notification of change of auditors
(1) A dealer shall immediately give written notice to the Commission if-
(a) where the dealer is a corporation, it-
(i) proposes to give notice to its shareholders of an ordinary resolution
removing an auditor appointed under section 87 before the expiration of
his term of office; or (ii) gives notice to its shareholders of an
ordinary resolution replacing an auditor appointed under section 87 at the
expiration of his term of office with another auditor; and
(b) whether or not the dealer is a corporation, a person appointed under
section 87 to be the auditor of the dealer ceases to be such auditor
otherwise than in consequence of a resolution referred to in paragraph
(a).
(2) A dealer who contravenes subsection (1) commits an offence and is
liable on conviction to a fine of $ 5,000.
(Added 26 of 1992 s. 3)
88. Dealer to lodge auditor's report
(1) A dealer shall, in respect of the financial year beginning before and
ending after-(a) the day on which this section commences; or
(b) the day on which the dealer commences to carry on business as a
dealer, whichever is the later day, and in respect of each subsequent
financial year, prepare a true and fair profit and loss account and a
balance sheet made up to the last day of the financial year and cause
those documents to be lodged with the Commission not later than 4 months
after the end of the financial year, together with an auditor's report
containing the information prescribed by regulations. (Amended 62 of 1976
s. 26) (2) Notwithstanding subsection (1), the period within which the
documents referred to in subsection (1) are required to be lodged may be
extended by the Commission for such period as it thinks fit, where an
application for the extension is made by the dealer and the Commission is
satisfied there are special reasons for requiring the extension. (Amended
63 of 1990 s. 4)
(3) An extension under subsection (2) may be allowed subject to such
conditions, if any, as the Commission thinks fit to impose.
(4) Any dealer who fails to lodge the documents required by this section
with the Commission within the time allowed by or under this section shall
be guilty of an offence and shall be liable on conviction to a fine of
$ 5,000.
(Amended 10 of 1989 s. 65)
89. Auditor to send report directly to Commission in certain cases
(1) If, during the performance of his duties as auditor for a dealer, an
auditor-(a) becomes aware of any matter which in his opinion adversely
affects the financial position of the dealer to a material extent; or
(b) discovers evidence of a contravention by the dealer of section 65B,
81, 83 or 84, (Amended 58 of 1985 s. 58)
he shall, as soon as practicable thereafter, send to the Commission and to
the dealer a report in writing of the matter or, as the case may be,
concerning the contravention. (Amended 10 of 1989 s. 65; 26 of 1992 s. 4)
(2) An auditor of a dealer appointed under section 87 shall immediately
give written notice to the Commission if he-
(a) resigns before the expiration of his term of office;
(b) decides not to seek re-appointment; or
(c) decides to include any qualification or adverse statement in his
report on the dealer's accounts. (Added 26 of 1992 s. 4)
89A. Communication by auditor with Commission
(1) No duty which an auditor of a dealer may be subject to shall be
regarded as contravened by reason of his communicating in good faith to
the Commission, whether or not in response to a request made by the
Commission, 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 Commission under this Ordinance or the Securities and Futures
Commission Ordinance (Cap. 24)
(2) Subsection (1) applies to an auditor of a former dealer and a former
auditor as it applies to an auditor of a dealer.
(3) In this section-
"former auditor" means a person who was formerly the auditor of a dealer
or former dealer;
"former dealer" means a person who was formerly a dealer.
(Added 26 of 1992 s. 5)
90. Power of Commission to appoint auditor
(1) Where-
(a) a dealer has failed to lodge an auditor's report under section 88; (b)
the Commission has received a report under section 89; or
(c) the Commission has reason to believe that a dealer has failed to
comply with section 65B, (Added 58 of 1985 s. 59)
the Commission may, if it is satisfied that it is in the interests of the
dealer concerned, the dealer's clients, or the general public, to do so,
appoint in writing an auditor to examine, audit, and report, either
generally or in relation to any matter, on the books, accounts, and
records of, and securities held by, the dealer. (Amended 58 of 1985 s. 59)
(2) Where the Commission is of the opinion that the whole or any part of
the costs and expenses of an auditor appointed by it under this section
should be borne by the dealer concerned or the Exchange Company, it may,
by order in writing, direct the dealer or the Exchange Company to pay a
specified amount, being the whole or part of those costs and expenses,
within the time and in the manner specified. (Amended 58 of 1985 s. 59)
(3) Where a dealer or Exchange Company has failed to comply with an order
of the Commission under subsection (2), the amount specified in the order
may be sued for and recovered by the Commission as a debt in any court of
competent jurisdiction. (Amended 58 of 1985 s. 59)
(Amended 10 of 1989 s. 65)
91. Power of Commission to appoint an auditor on the application of a
client (1) On receipt of an application in writing from a person who
alleges that a dealer has failed to account to him in respect of any money
or securities held or received by that dealer for him or on his behalf,
the Commission may, after first giving the dealer an opportunity to give
an explanation of the failure, appoint in writing an auditor to examine,
audit, and report, either generally or in relation to any particular
matter, on the books, accounts, and records of, and securities held by,
that dealer. (2) Every application under subsection (1) shall state-
(a) particulars of the circumstances under which the dealer received the
money or securities in respect of which he is alleged to have failed to
account; (b) particulars of that money or those securities and of the
transactions of the applicant and the dealer relating thereto; and
(c) such other particulars as may be prescribed by regulations.
(3) Every statement in any such application shall be verified by statutory
declaration made by the applicant and shall, if made in good faith and
without malice, be privileged.
(4) The Commission shall not appoint an auditor under subsection (1)
unless it is satisfied-
(a) that the applicant has good reason for making the application; and
(b) that it is in the interests of the dealer or the applicant or the
public generally that the books, accounts, and records of, and securities
held by, the dealer should be examined, audited, and reported on.
(Amended 10 of 1989 s. 65)
92. Auditor to report to Commission
An auditor appointed under section 90 or 91 shall, on the conclusion of
the examination and audit in respect of which he was appointed, make a
report thereon to the Commission. (Amended 10 of 1989 s. 65)
93. Powers of auditors
An auditor appointed by the Commission to examine and audit the books,
accounts, and records of, and securities held by, a dealer may for the
purpose of carrying out the examination and audit- (Amended 10 of 1989 s.
65)
(a) examine on oath the dealer concerned and, where the dealer carries on
business in partnership or is a corporation, any of the members of the
partnership or, as the case may be, any director of the corporation and
any of the dealer's servant and agents and any other auditor appointed
under this Ordinance in relation to those books, accounts, records, and
securities;
(b) employ such persons as he considers necessary; and
(c) by instrument in writing under his hand, authorize any person employed
by him to do, in relation to the examination and audit, any act or thing
that he could do himself as an auditor, except to examine any person on
oath or to exercise any other powers conferred by this paragraph.
94. Right of auditors and employees to communicate certain matters
Except for the purpose of carrying into effect the provisions of this
Ordinance or so far as may be required for the purposes of any legal
proceedings, whether civil or criminal, an auditor appointed under section
90 or 91 and an employee of any such auditor shall not divulge any
information which may come to his knowledge in the course of performing
his duties as an auditor or employee under section 90 or 91, as the case
may be, to any person other than-
(a) the Commission; and (Amended 10 of 1989 s. 65)
(b) - (c) (Repealed 10 of 1989 s. 65)
(d) in the case of an employee, the auditor by whom he is employed.
95. Books, accounts, and records to be produced on demand
(1) On request by an auditor appointed under this Part or a person who
produces a written authority in that behalf under section 93 (c) -
(a) a dealer and, where the dealer is a corporation or carries on business
in partnership, the directors of the corporation or the other members of
the partnership, and the dealer's servants and agents, shall produce any
books, accounts, and records of any securities held by the dealer relating
to the dealer's business; and (b) an auditor appointed by a dealer shall
produce any books, accounts, and records held by him relating to the
business of the dealer.
(2) A dealer and, where the dealer is a corporation or carries on business
in partnership, the directors of the corporation or the other members of
the partnership, as the case may be, and the dealer's servants and agents
and any auditor appointed by the dealer shall answer all questions
relevant to an examination and audit which are put to him by an auditor
appointed under this Part or a person who produces a written authority in
that behalf given under section 93 (c).
(3) Any person mentioned in subsection (1) who, without reasonable excuse,
fails to comply with any request made to him under that subsection, or any
person mentioned in subsection (2) who, without reasonable excuse, refuses
or fails to answer any question put to him under that subsection, shall be
guilty of an offence and shall be liable on conviction to a fine of
$ 10,000 and to imprisonment for 2 years.
96. Offence to destroy, conceal, or alter records or send records or other
property outside Hong Kong
(1) Any person who, with intent to prevent, delay, or obstruct the
carrying out of any examination and audit under this Part-
(a) destroys, conceals or alters any book, account, record or document
relating to the business of a dealer; or
(b) sends or attempts to send, or conspires with any other person to send,
out of Hong Kong any such book, account, record, or document, or any
property of any description belonging to or in the disposition of or under
the control of a dealer, shall be guilty of an offence and shall be liable
on conviction to a fine of $ 50,000 and to imprisonment for 2 years.
(2) If, in a prosecution for an offence under subsection (1), it is proved
that the person charged-
(a) destroyed, concealed, or altered any book, account, record, or
document mentioned in that subsection; or
(b) sent or attempted to send, or conspired to send, out of Hong Kong any
such book, account, record, or document or any property mentioned in
paragraph (b) of that subsection, the onus of proving that in so doing he
did not act with intent to prevent, delay, or obstruct the carrying out of
an examination and audit under this Part shall lie on him.
(3) Any person who, with intent to prevent, delay, or obstruct the
carrying out of an examination and audit under this Part, leaves, or
attempts to leave, Hong Kong shall be guilty of an offence and shall be
liable on conviction to a fine of $ 50,000 and to imprisonment for 2
years.
97. Right of committee to impose obligations, etc., on members of Exchange
Company not affected by this Part
Nothing in this Part shall prevent the committee of the Exchange Company
from imposing on members of the Exchange Company any further obligations
or requirements which the committee thinks necessary with respect to-
(a) the audit of accounts;
(b) the information to be given in reports by auditors; or
(c) the keeping of accounts, books, and records.
(Amended 58 of 1985 s. 60)
PART X COMPENSATION FUND
98. Interpretation
(1) In this Part, unless the context otherwise requires-
"Committee" means the Securities Compensation Fund Committee established
under section 100 (1);
(Amended 10 of 1989 s. 65)
"compensation fund" means the fund established under section 99;
"default", in relation to the failure of a stockbroker to perform a legal
obligation, means a default arising from-
(a) the bankruptcy, winding up or insolvency of the stockbroker;
(b) any breach of trust committed by the stockbroker; or
(c) any defalcation, fraud or misfeasance committed by the stockbroker or
partner, being a partner in a dealing partnership, or by the servant of
the stockbroker or of a dealing partnership in which he is a partner;
(Replaced 58 of 1985 s. 61)
"legal obligation" includes an obligation arising under a contract or
quasicontract or under a trust (including a constructive trust);
"stockbroking business" means-
(a) a business of dealing in securities listed or quoted on the Unified
Exchange carried on by a member of the Exchange Company;
(b) the administration of any trust, or the carrying on of the business of
any company, in conjunction with, or as an adjunct to, a business
specified in paragraph (a); (c) the retention of securities whether for
safe keeping or otherwise, and whether for specific consideration or
otherwise, in conjunction with, or as an adjunct to, a business specified
in paragraph (a). (Replaced 58 of 1985 s. 61)
(2) A reference in this Part to a claimant or person making a claim
includes, in the event of his death, insolvency, or other disability, a
reference to his personal representative or any other person having
authority to administer his estate.
99. Establishment of compensation fund
The Commission shall establish and maintain a compensation fund, to be
known as the Unified Exchange Compensation Fund, for the purposes set out
in this Part. (Amended 58 of 1985 s. 62)
100. Securities Compensation Fund Committee
(1) There shall be a committee, to be known as the Securities Compensation
Fund Committee, which shall be responsible, subject to this section, for
the administration of the compensation fund.
(2) The Committee shall consist of 5 persons appointed by the Commission,
of whom at least two shall be directors of the Commission and two shall be
persons nominated by the Exchange Company. (Amended 58 of 1985 s. 63)
(3) The Commission shall nominate one of the members of the Committee who
is also a director of the Commission to be chairman of the Committee.
(4) The Committee shall exercise on behalf of the Commission such of the
powers, duties, and functions of the Commission under this Part as may
from time to time be delegated to the Committee by the Commission; but the
Commission may not delegate its power of delegation under this section or
its powers under section 110.
(5) Any power, duty, or function delegated under this section may be
exercised by members forming a majority of the Committee as if by this
Part that power, duty, or function had been conferred on a majority of the
members of the Committee.
(6) Any delegation under this section may at any time be varied or
revoked.
(7) The Commission may at any time remove any member of the Committee
appointed by it under this section and may fill any vacancy in the
Committee however arising. (8) Subject to any direction of the
Commission, the Committee may regulate its procedure in such manner as it
thinks fit.
(Amended 10 of 1989 s. 65)
101. Money constituting the Compensation fund
(1) The compensation fund shall consist of-
(a) all money paid to or deposited with the Commission by the Exchange
Company in accordance with the provisions of this Part; (Amended 58 of
1985 s. 64) (b) (Repealed 58 of 1985 s. 64)
(c) all money recovered by or on behalf of the Commission by the exercise
of any right of action conferred by this Part;
(d) all money borrowed under subsection (2);
(e) all other money lawfully paid into the fund.
(2) The Commission may from time to time borrow for the purpose of the
compensation fund from any lender and may charge any investments acquired
under section 105 by way of security for any such loan; but the aggregate
sum owing at any one time in respect of any such loans shall not exceed
$ 1,000,000.
102. Money to be kept in bank account
The Commission shall open at one or more licensed banks a separate bank
account or separate bank accounts and shall, pending its application in
accordance with this Part, pay into or transfer to that account or those
accounts all money forming part of the compensation fund.
103. Accounts of fund
(1) The Commission shall keep proper accounts of the compensation fund,
and shall in respect of the financial year beginning before and ending
after the day on which this section commences, and in respect of each
subsequent financial year, prepare a revenue and expenditure account, and
a balance sheet made up to the last day of that year. (2) The Commission
shall appoint an auditor to audit the compensation fund. (3) The auditor
so appointed shall annually audit the accounts of the compensation fund
and shall audit, and prepare an auditor's report in respect of, each
balance sheet and revenue and expenditure account prepared under
subsection (1) and shall submit the report to the Commission.
(4) Not later than the 31st day of July in each year the Commission shall
cause a copy of the audited balance sheet, revenue and expenditure
account, and the auditor's report to be sent to the Exchange Company.
(Amended 58 of 1985 s. 65)
104. Exchange Company to make deposits in respect of members
(1) The Exchange Company shall, subject to the provisions of this Part,
deposit with the Commission and keep deposited in respect of each
membership of the Exchange Company a sum of $ 50,000 payable in cash.
(2) The amount referred to in subsection (1) shall be deposited-
(a) in respect of every membership held on the appointed day, not later
than 1 month after that date; and
(b) in respect of every membership taken up after the appointed day, not
later than 1 month after the date on which such membership is taken up.
(3) For the purposes of this section and section 106, each share in the
Exchange Company held by a member shall be deemed to constitute a separate
membership. (4) Any amount due under this section may be sued for and
recovered by the Commission as a debt in any court of competent
jurisdiction.
(Replaced 58 of 1985 s. 66)
105. Balance of sums in bank account may be invested
(1) The Commission may invest any money which forms part of compensation
fund and is not immediately required for any other purposes provided for
by this Part either-(a) on fixed deposit with a licensed bank; or
(b) in securities in which trustees are authorized by law to invest trust
funds. (2) As soon as practicable after the end of each financial year,
the Commission shall notify the Exchange Company in writing of- (Amended
58 of 1985 s. 67)
(a) the rate of interest to be paid for that financial year in respect of
each sum deposited under section 104 (1) (a);
(b) the manner and time of payment of that interest; and
(c) the amount to be charged to meet the expenses incurred or involved in
the administration of the compensation fund. (Replaced 62 of 1976 s. 28)
(3) Any fixed deposit receipts or documents relating to the investment of
money in securities under subsection (1) may be kept in the office of the
Commission or deposited by the Commission for safe-keeping with a licensed
bank. (Added 62 of 1976 s. 28)
106. Repayment of deposits in certain cases
(1) Where the Exchange Company has deposited a sum of money with the
Commission under section 104 in respect of any membership and that
membership for any reason ceases, the Commission shall, unless the money
is required to satisfy any claims or liabilities arising before such
membership ceased, within 6 months after the cessation of such membership,
deliver to the Exchange Company the sum deposited in respect thereof. (2)
If any money has been delivered to the Exchange Company pursuant to
subsection (1) in respect of any membership, the Exchange Company shall,
if the member has satisfied all financial obligations due in respect of
such membership from the member to the Exchange Company and is otherwise
in good standing with the Exchange Company, deliver the money-
(a) to the member;
(b) where the member has died or is bankrupt, to his personal
representative or trustee in bankruptcy, as the case may be; or
(c) where the member is a corporation in liquidation, to the liquidator
thereof. (Replaced 58 of 1985 s. 68)
107. Replenishment of fund in certain cases
(1) Subject to subsection (2), if at any time resort has to be made to any
money deposited under section 104 in order to satisfy any claim made
against the compensation fund in relation to a stockbroker, the Exchange
Company shall. on being required to do so by the Commission, shall. on
being required to do so by the Commission, replenish the fund by
depositing with the Commission an amount that is equal to that paid in
connection with the satisfaction of the claim, including any legal and
other expenses paid or incurred in relation to the claim.
(2) The Commission may not require the Exchange Company to make a deposit
under subsection (1) in respect of any payment made to satisfy a claim
under this Part unless it has first exhausted all relevant rights of
action and other legal remedies, conferred by section 118, against the
stockbroker, in relation to whom the claim arose. (3) Any amount required
to be deposited under this section may be sued for and recovered by the
Commission as a debt in any court of competent jurisdiction. (Replaced 58
of 1985 s. 68)
108. Payments out of the fund
(1) Subject to this Part, there shall from time to time be paid out of the
compensation fund as required and in the following order-
(a) all legal and other expenses incurred in investigating or defending
claims made under this Part or incurred in relation to the fund or in the
exercise by the committee of the Exchange Company or the Commission of the
rights, powers, and authorities vested in them by this Part in relation to
the fund; (Amended 58 of 1985 s. 69) (b) the expenses incurred or involved
in the administration of the fund; (c) the amounts of all claims,
including costs, allowed by the committee of the Exchange Company or
established against the Exchange Company under this Part; and (Replaced 58
of 1985 s. 69)
(d) all other money payable out of the fund in accordance with this Part.
(2) - (3) (Repealed 58 of 1985 s. 69)
109. Claims against the fund
(1) Where, in consequence of any act done in the course of or in
connection with the stockbroking business of a stockbroker, a person has a
cause of action against that stockbroker in relation to any money,
securities or other property entrusted to or received by the stockbroker
or any partner of the stockbroker or any person employed by the
stockbroker, that person shall be entitled, subject to this Part, to claim
compensation from the compensation fund in respect of any pecuniary loss
suffered by him. (Replaced 58 of 1985 s. 70)
(2) Subsection (1) does not entitle any stockbroker or recognized clearing
house to make a claim against the compensation fund. (Replaced 58 of 1985
s. 70. Amended 10 of 1989 s. 65; 68 of 1992 s. 20)
(3) Except as otherwise provided in this Part, the total amount that may
be paid under this Part to all persons who suffer loss through any default
mentioned in subsection (1) shall not in any event exceed $ 8,000,000 in
respect of each stockbroker concerned in or connected with the default;
but for the purposes of this subsection any amount paid from the
compensation fund shall, to the extent that the fund is subsequently
reimbursed in respect of any such payment (not being a deposit made under
section 107), be disregarded. (Amended L. N. 101 of 1980; 58 of 1985 s.
70; 68 of 1992 s. 20) (4) A person shall not have a claim against the
compensation fund in respect of a default committed before the appointed
day. (Amended 58 of 1985 s. 70) (5) Subject to this Part, the amount which
any claimant is entitled to claim as compensation from the compensation
fund is the amount of the actual pecuniary loss suffered by him, including
the reasonable costs of and incidental to the making and proving of his
claim. (Replaced 58 of 1985 s. 70. Amended L. N. 294 of 1988) (6) In
addition to any compensation payable under this Part, interest shall be
payable out of the compensation fund on the amount of the compensation,
less any amount attributable to costs and disbursements, at such rate as
may be determined by the Commission from time to time, which shall be
calculated from the day on which the default was committed and continue
until the day on which the claim is satisfied. (7) For the purposes of
this section-
(a) "stockbroker" includes a person who has been, but, at the time of any
default mentioned in subsection (1), had ceased to be, a member of the
Exchange Company if, at the time when the claimant entered into the
transaction or course of dealing giving rise to the claim, the claimant
had reasonable grounds for believing that person to be a member of the
Exchange Company; (Amended 58 of 1985 s. 70).
(b) - (c) (Repealed 58 of 1985 s. 70)
110. Powers of Commission to increase payments made in respect of claims
(1) If, after consultation with the committee of the Exchange Company and
after taking into account all ascertained or contingent liabilities of the
compensation fund, the Commission considers that the assets of the fund,
the Commission considers that the assets of the fund so permit, it may be
notice published in the Gazette increase the total amount which may be
claimed from the fund under section 109; and from the date of that
publication, until the notice is revoked or varied, the amount specified
in the notice shall be the maximum amount that may be claimed under that
section. (Amended L. N. 92 of 1980; 58 of 1985 s. 71)
(2) A notice under subsection (1) may be varied or revoked by the
Commission by notice published in the Gazette.
111. Rights of innocent partner, etc. in relation to the fund
(1) Notwithstanding anything to the contrary under this Part, where all
persons submitting claims under section 109 have been fully compensated in
accordance with the provisions of this Part for the loss sustained by them
as a result of the failure of a partner in a dealing partnership or a
director of a stockbroker which is a corporation to perform a legal
obligation, any other partner of that partnership who has made payment to
any person in compensation for loss sustained by him as a result of that
failure or, where a stockbroker which is a corporation or a dealing
director of such a stockbroker has made such a payment, that stockbroker,
or dealing director, shall be subrogated to the extent of the payment to
all the rights and remedies against the compensation fund if the Exchange
Company considers, having regard to all the circumstances, that he-
(a) was in no way a party to the default which resulted in the failure to
perform that obligation; and
(b) acted honestly and reasonably in the matter. (Replaced 58 of 1985 s.
72) (2) If any partner of the dealing partnership, or any stockbroker
which is a corporation, or any director of such a corporation, is
aggrieved by the decision of the Exchange Company under subsection (1), he
or it may, within 28 days after receipt of notice of the decision, appeal
to the Commission against the decision. (Amended 58 of 1985 s. 72)
(3) An appellant shall, on the same day as lodging a notice of appeal with
the Commission, lodge a copy of the notice with the Exchange Company.
(Amended 58 of 1985 s. 72)
(4) The Commission shall inquire into and decide on the appeal and, if the
Commission considers having regard to all the circumstances that the
appellant-
(a) was in no way a party to the default in question; and
(b) acted honestly and reasonably in the matter,
it may direct that the appellant shall, to the extent of any payment made
by him, be subrogated to all the rights and remedies in relation to the
compensation fund of the person to whom he or it has made payment in
compensation.
112. Notice calling for claims against the fund
(1) The committee of the Exchange Company may cause to be published in one
or more English language newspapers and one or more Chinese language
newspapers, published daily and circulating generally in Hong Kong, a
notice specifying a date, not being earlier than 3 months after
publication of the notice, on or before which claims for compensation from
the compensation fund may be made in relation to the person specified in
the notice.
(2) Where any person wishes to claim compensation under this Part, he
shall lodge his claim in writing with the committee of the Exchange
Company-
(a) if a notice under subsection (1) has been published, on or before the
date specified in the notice; or
(b) if no such notice has been published, within 6 months after the
claimant became aware of the default giving rise to the claim.
(3) Any claim which is not made within the time limited by subsection (2)
shall, unless the committee of the Exchange Company otherwise determines,
be barred. (4) An action for damages shall not lie against the Exchange
Company or against the Committee or any member thereof, or any employee of
the Exchange Company by reason of any notice published for the purposes of
this section in good faith and without malice. (Replaced 58 of 1985 s.
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