| 1 | 2 | 3 | 4 |
SECURITIES ORDINANCE
SECURITIES ORDINANCE
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.
73)
(Amended 58 of 1985 s. 73)
113. Power of the committee of the Exchange Company in respect of claims
(1) Where the committee of the Exchange Company is satisfied that a claim
made under section 109 is a proper claim, it shall, subject to this Part,
make a determination allowing the claim.
(2) If the committee is not satisfied as to the propriety of a claim under
section 109, it shall make a determination disallowing the claim or, if it
is satisfied only as to the propriety of part of such a claim, it shall
make a determination allowing the claim as to that part.
(3) Where the committee of the Exchange Company makes a determination
under subsection (1) or (2), it shall forthwith serve notice of its
determination in writing on the claimant or on his solicitor and deliver a
copy of the notice to the Commission. (4) If the committee of the
Exchange Company disallows or only partially allows a claim against the
compensation fund, the determination of the committee shall specify the
reasons for the disallowance or, as the case may be, partial allowance.
(5) If, in the case of any particular claim, after taking into account all
ascertained and contingent liabilities of the compensation fund, the
committee of the Exchange Company considers that the assets of the fund so
permit, it may, with the prior approval of the Commission, allow in
respect of a claim which is in excess of the total amount limited by or
under section 109 such additional sum in or towards the compensation of
the claimant as it thinks fit.
(6) The receipt of a copy of a notice under subsection (3) notifying the
allowance or partial allowance of a claim is sufficient authority for the
Commission to pay to the claimant the amount allowed under this section.
(Amended 58 of 1985 s. 74)
114. Committee of the Exchange Company may require production of
securities, etc. (1) The committee of the Exchange Company may at any
time require any person to produce any securities, documents, or
statements of evidence necessary-
(a) in order to substantiate any claim made against the compensation fund;
or (b) for the purpose either of exercising its rights against a
stockbroker or against any other person concerned; or
(c) for the purpose of enabling criminal proceedings to be brought against
any person in respect of a default, being a default which is or involves
the commission of a criminal offence.
(2) Where any claimant required to produce any securities, documents, or
statements of evidence under subsection (1) fails to produce them the
committee of the Exchange Company may, if it is satisfied that securities,
documents, or statements are in the possession of, or available to, the
claimant, refuse to allow the claimant's claim until such time as he
produces them.
(Amended 58 of 1985 s. 75)
115. Court proceedings to establish a claim against the fund
(1) Subject to subsection (2), a person whose claim has been disallowed,
or only partially allowed, under section 113 may, at any time after the
service under that section of the notice notifying the disallowance or
partial allowance commence proceedings against the Exchange Company to
establish his claim against the compensation fund.
(2) Except with leave of the Court, no proceedings against the Exchange
Company in respect of a claim which has been disallowed, or only partially
allowed, under section 113 may be commenced after the expiration of 3
months after the service of the notice under subsection (3) of that
section.
(3) Any proceedings brought against the Exchange Company to establish a
claim against the compensation fund shall be by action as for a debt due
from the Exchange Company. (Amended 58 of 1985 s. 76)
116. Supplementary provisions relating to proceedings brought under
section 115 In any proceedings brought under section 115, -
(a) all defences that would have been available to the person or persons
in relation to whom the claim arose shall be available to the Exchange
Company; (Amended 58 of 1985 s. 77)
(b) all questions as to costs shall be in the discretion of the Court; and
(c) evidence which would be admissible against the stockbroker or any
other person by whom it is alleged a default was committed is admissible
to prove the commission of the default, notwithstanding that the
stockbroker or other person is not the defendant in or a party to those
proceedings.
117. Form of court order establishing claim
Where, in any proceedings brought against the Exchange Company to
establish a claim against the compensation fund, the Court is satisfied
that the default on which the claim is founded was actually committed and
that the claimant otherwise has a valid claim, the Court shall by order-
(a) allow the amount of the claim or such part of the claim as it thinks
proper; (b) declare the fact and date of the default and the amount
allowed under paragraph (a); and
(c) direct the Commission to pay to the claimant the amount declared under
paragraph (b).
(Amended 58 of 1985 s. 78)
118. Subrogation of the Commission to rights, etc., of claimant on payment
from fund On the Commission making any payment out of the compensation
fund in respect of any claim under this Part, -
(a) the Commission shall be subrogated to the extent of that payment to
all the rights and remedies of the claimant in relation to the loss
sustained by him by reason of the default on which the claim was based;
and
(b) the claimant shall have no right in bankruptcy or winding up or by
legal proceedings or otherwise to receive in respect of the loss any sum
out of the assets of the stockbroker concerned or any dealing partnership
in which he is a partner, or where the loss was caused by the defalcation,
fraud or misfeasance of a servant or partner of the stockbroker, the
assets of that servant or partner, until the Commission has been
reimbursed the full amount of its payment.
(Replaced 58 of 1985 s. 79)
119. Payment of claims only from the fund
No money or other property belonging to the Commission or to the Exchange
Company, other than the compensation fund, shall be available for the
payment of any claim under this Part, whether the claim is allowed by the
committee of the Exchange Company or is made the subject of an order of
the Court or otherwise.
(Amended 58 of 1985 s. 80)
120. Provision where fund is insufficient to meet claims or where claims
exceed total amount payable
(1) Where the amount at credit in the compensation fund is insufficient to
enable the payment of the whole amount of all claims against it which have
been allowed or in respect of which orders have been made, then the amount
at credit shall, subject to subsection (2), be apportioned between the
claimants in such manner as the committee of the Exchange Company or, as
the case may be, the Court thinks equitable; and any such claim, so far as
it remains unpaid, shall be charged against further receipts of the fund
and paid out of the fund when there is again money available in the fund.
(2) Where the aggregate of all claims against the compensation fund which
have been allowed, or in respect of which orders of the Court have been
made, in relation to the default giving rise to the claims exceeds the
total amount which may be paid under this Part in respect of the
stockbroker or stockbrokers concerned in the default, that total amount
shall be apportioned between the claimants in such manner as the committee
of the Exchange Company or, as the case may be, the Court thinks
equitable; and, on payment out of the fund of that total amount in
accordance with that apportionment-(a) all such claims and any order of
the Court relating to them; and
(b) all other claims which may subsequently arise or be made in connection
with the default,
shall be absolutely discharged.
(Amended 58 of 1985 s. 81)
121. Power of Commission to return contributions on winding up the
Exchange Company In the event of the Exchange Company being wound up under
the Companies Ordinance (Cap. 32), the Commission may, in its absolute
discretion, after the satisfaction of all outstanding liabilities against
the compensation fund, pay to the liquidator of the Exchange Company the
whole or any part of the amounts contributed by the Exchange Company under
this Part, together with any income accrued in respect thereof; and on any
such payment being made those amounts shall form part of the assets of the
Exchange Company and be available to the liquidator for distribution in
accordance with the Companies Ordinance (Cap. 32).
(Amended 58 of 1985 s. 82)
121A. Commission may act where committee fails to do so
Notwithstanding anything in this Part, where the Commission is satisfied
that the committee of the Exchange Company has-
(a) failed or refused to exercise any of its powers, functions or duties
under this Part; or
(b) unreasonably delayed the making of any determination under section
113, it may exercise all or any of the powers, functions or duties of the
committee of the Exchange Company under this part, and any act done or
determination made by the Commission pursuant to its powers under this
section shall be deemed, for the purposes of this Part, to be an act done
or determination made by the committee. (Added 58 of 1985 s. 83. Amended
10 of 1989 s. 65)
PART XI INSPECTIONS AND INVESTIGATIONS
Inspections
122-125. (Repealed 10 of 1989 s. 65)
Investigations
126. Interpretation for the purposes of sections 127 to 134
In sections 127 to 134, unless the context otherwise requires-
"inspector" means an inspector appointed under section 127 (1);
"investigation" means an investigation made under section 127 by an
inspector; "prescribed person" means a person suspected or believed by an
inspector, on reasonable grounds, to be capable of giving information
concerning any matter to be investigated by the inspector.
127. Investigation by inspector
(1) Where it appears to the Commission that it is desirable for the
protection of the public or of the holders of securities to appoint an
inspector to investigate-(a) any alleged breach of trust, defalcation,
fraud, or misfeasance; or (b) any matter concerning dealing in securities
or the giving of investment advice, the Commission may, by instrument in
writing, appoint a person as an inspector to investigate the allegation or
matter and to report on it in such manner as the Commission directs.
(Replaced 62 of 1976 s. 32)
(2) The Commission shall, in an instrument appointing an inspector,
specify full particulars of the appointment including-
(a) the matters into which the investigation is to be made; and
(b) the terms and conditions of the appointment including terms and
conditions relating to remuneration.
(3) An inspector may require a prescribed person by notice in the form
prescribed by regulations given in the manner as prescribed-
(a) to produce to the inspector such documents relating to a matter with
which his investigation is concerned as are in the custody or under the
control of that person; (b) to give to the inspector all reasonable
assistance in connection with the investigation; and
(c) to appear before the inspector for examination on oath,
and may administer the oath referred to in paragraph (c).
(4) Where documents are produced to an inspector under this section the
inspector may take possession of them for such period as he considers
necessary for the purposes of his investigation, and during that period he
shall permit a person who would be entitled to inspect any one or more of
those documents if they were not in the possession of the inspector to
inspect at all reasonable times such of them as that person would be so
entitled to inspect.
(5) A prescribed person-
(a) shall comply with a requirement of an inspector under subsection (3);
(b) shall not knowingly furnish to the inspector, whether on examination
in pursuance of such requirement or otherwise, information that is false
or misleading in a material particular; or
(c) when appearing before an inspector for examination in pursuance of
such a requirement, shall take an oath in accordance with the requirement.
(6) Any person who, without reasonable excuse, contravenes any of the
provisions of subsection (5) shall be guilty of an offence and shall be
liable on conviction to a fine of $5,000.
(7) A solicitor or counsel acting for a prescribed person-
(a) may attend an examination of that person; and
(b) may, to the extent that the inspector permits-
(i) address the inspector; and
(ii) examine that person,
in relation to matters in respect of which the inspector has questioned
that person. (8) A prescribed person is not excused from answering a
question put to him by an inspector on the ground that the answer might ,
tend to incriminate him but, where that person claims, before answering
the question, that the answer might tend to incriminate him, neither the
question nor the answer is admissible in evidence against him in criminal
proceedings other than proceedings under subsection (6) or in relation to
a charge of perjury in respect of the answer.
(9) A person who complies with the requirement of an inspector under
subsection (3) shall not incur any liability to any person by reason only
of that compliance. (10) A person required to attend for examination
under this section is entitled to such allowances and expenses as may be
prescribed by regulations.
(11) Where a prescribed person fails to comply with a requirement of an
inspector under subsection (3), the inspector may, unless that person
proves that he had a lawful authority for his failure, certify the failure
by writing under his hand to the Court. (12) Where an inspector gives a
certificate under subsection (11), the Court may inquire into the case
and-
(a) order the prescribed person to whom the certificate relates to comply
with the requirement of the inspector within such period as is fixed by
the Court; or (b) if the Court is satisfied that that person failed
without lawful authority to comply with the requirement of the inspector,
punish him in the same manner as if he had been guilty of contempt of
court.
128. Notes of examination
(1) An inspector may cause notes of an examination made by him under this
Part to be recorded in writing and be read to or by the person examined
and may require that person to sign the notes and, subject to this
section, notes signed by that person may be used in evidence in any legal
proceedings against that person.
(2) A copy of the notes signed by a person shall be furnished without
charge to that person upon request made by him in writing.
(3) Notes made under this section that relate to a question the answer to
which a person has claimed might tend to incriminate him shall not be used
as evidence in criminal proceedings other than proceedings under section
127 (6) or in relation to a charge of perjury in respect of the answer.
(4) Nothing in this section affects or limits the admissibility of other
written evidence or of oral evidence.
(5) The Commission may give a copy of notes made under this section to a
solicitor or counsel who satisfies the Commission that he is acting for a
person who is conducting or is, in good faith, contemplating legal
proceedings in respect of matters, required to be investigated by the
inspector, being affairs investigated by an inspector under this Part.
(6) A solicitor or counsel to whom a copy of notes is given under
subsection (5) shall not use the notes except in connection with the
institution or preparation of, and in the course of, legal proceedings and
shall not disclose for any other purpose the notes or any part of the
contents of them to any person.
(7) Any solicitor or counsel who contravenes subsection (6) shall be
guilty of an offence and shall be liable on conviction to a fine of
$ 2,000.
(8) Where a report is made under section 130 any notes recorded under this
section relating to that report shall be furnished with the report.
129. Delegation of powers, etc., by inspector
(1) An inspector may by instrument in writing-
(a) delegate all or any of his powers or functions under this Part except
this power of delegation, the power to administer an oath, and the power
to examine on oath; and (b) vary or revoke a delegation given by him. (2)
A power or function delegated by an inspector may be exercised or
performed by the delegate in accordance with the instrument of delegation
as in force from time to time. (3) A delegate shall, at the request of a
prescribed person, produce the instrument of delegation for inspection.
(4) A delegation under this section by an inspector of a power or function
does not prevent the exercise of the power or the performance of the
function by the inspector.
130. Report of inspector
(1) On completion of an investigation under section 127, the inspector
shall report his findings to the Commission and shall deliver a copy of
the report to the Attorney General.
(2) Subject to subsection (3), the Commission shall give a copy of the
inspector's report to the prescribed person whose affairs were
investigated by the inspector. (3) Subject to subsection (4), the
Commission shall not give a report to a prescribed person if the Attorney
General believes that legal proceedings that have been, or that in its
opinion might be, instituted might be prejudiced by the report.
(4) The court before which legal proceedings are brought against a
prescribed person for or in respect of matters dealt with in a report
under this section may order that a copy of the report be given to that
person.
(5) The Commission may, if it is of the opinion that it is in the public
interest to do so, cause the whole or any part of a report under this
section to be printed and published.
(6) If, from a report under this section, it appears to the Attorney
General that an offence may have been committed by a person and that a
prosecution ought to be instituted, the Attorney General shall cause a
prosecution to be instituted. (7) Where it appears to the Attorney
General that a prosecution ought to be instituted, he may, by notice in
writing given before or after the institution of a prosecution in
accordance with subsection (6), require a prescribed person to give all
assistance in connection with prosecution that he is reasonably able to
give.
(8) If from a report under this section it appears to the Commission or to
the Attorney General that proceedings ought in the public interest to be
brought by a prescribed person for the recovery of damages in respect of a
breach of trust, defalcation, fraud, or misfeasance in connection with the
affairs of the prescribed person or for the recovery of property of the
prescribed person, either the Commission or the Attorney General may cause
proceedings to be instituted accordingly in the name of the prescribed
person. (Amended 62 of 1976 s. 33)
131. Privileged communications
(1) An inspector shall not require disclosure by a solicitor or counsel of
any privileged communication, whether oral or written, made to or by him
in that capacity, except as regards the name and address of his client.
(2) Nothing in sections 127 to 130 shall be construed as affecting section
4 of the Inland Revenue Ordinance (Cap. 112).
132. Cost of investigation
(1) Subject to this section, the expenses of and incidental to an
investigation by an inspector (including the expenses incurred and payable
by the Commission in any proceedings brought by it in the name of a
prescribed person) shall be paid out of money provided by the Legislative
Council.
(2) An application referred to in subsection (3) may be made to a court by
or on behalf of-
(a) the Commission or the Attorney General in the course of proceedings in
that court instituted in the name of a prescribed person under section 130
(8); or (b) the Attorney General on, or within 14 days after, a conviction
by the court in proceedings certified by the Attorney General, for the
purposes of the application, to have been instituted as a result of an
investigation by an inspector,
and the court may make such order with respect to the application and its
subject matter as it thinks fit.
(3) The application that may be made under subsection (2) is an
application for one or more of the following orders-
(a) that a specified person pay the whole, or a specified part of, the
expenses of and incidental to, the investigation that led to the
proceedings;
(b) where expenses have been paid under subsection (1), that a specified
person reimburse the Commission to the extent of the payment;
(c) that a specified person reimburse the Commission in respect of the
remuneration of any person employed by the Commission in connection with
the investigation. (4) If no proceedings under section 130 (6) are
commenced against a prescribed person, or, where the prescribed person is
a corporation, against any director of the corporation, within 6 months
after the completion of an investigation by an inspector, the prescribed
person may apply to a court for an order for the payment of costs incurred
by him in connection with the investigation; and the court may, if it
finds that the investigation was not warranted, order the Commission to
pay to the prescribed person such sum, not exceeding the amount of costs
actually incurred by the prescribed person in respect of the
investigation, as it thinks just.
(5) A copy of an application made under subsection (4) shall be served on
the Commission and the Commission shall be entitled to be heard at the
proceedings to determine the application.
133. Concealing, etc., of books relating to securities
(1) A person who-
(a) conceals, destroys, mutilates, or alters a document relating to a
matter which is the subject of an investigation by an inspector;
(b) sends, causes to be sent, or conspires with another person to send,
out of Hong Kong any such document; or
(c) being a prescribed person to whom notice has been given under section
127 (3), leaves Hong Kong,
shall be guilty of an offence and shall be liable on conviction to a fine
of $ 20,000 and to imprisonment for 2 years.
(2) It shall be a defence to a prosecution under subsection (1) to prove
that the person charged did not act with intent to defeat the purposes of
section 127 or to delay or obstruct the carrying out of an investigation
under that section.
134. Commission may make certain orders
(1) Where an investigation is being made under section 127 and it appears
to the Commission that facts concerning securities to which the
investigation relates cannot be ascertained because a prescribed person
referred to in that section has failed or refused to comply with a
requirement of an inspector under that section, the Commission may, by
order published in the Gazette, make one or more of the following orders-
(a) an order restraining a specified person from disposing of any interest
in specified securities;
(b) an order restraining a specified person from acquiring specified
securities; (c) an order restraining the exercise of any voting or other
rights attached to specified securities;
(d) an order directing a person who is registered as the holder of
securities in respect of which an order under this section is in force to
give notice in writing of that order to any person whom he knows to be
entitled to exercise a right to vote attached to those shares;
(e) an order directing a company not to make payment, except in the course
of a winding up by the Court, of any sum due from the company in respect
of specified securities; (f) an order directing a company not to register
the transfer or transmission of specified securities;
(g) an order directing a company not to issue shares to a person who holds
shares in the company by reason of his holding those shares nor in
pursuance of an offer made to such a person by reason of his holding those
shares.
(2) A copy of an order under subsection (1) and of any order by which it
is revoked or altered shall be served-
(a) where it relates to specified securities, on the authority or body
that issued them or made them available or, where the securities are
rights or options, on the authority or body against whom the right is, or
would be enforceable, or which issued or made available the securities to
which the option relates; and
(b) where it relates to a corporation, on the corporation.
(3) A person aggrieved by an order under subsection (1) may apply to the
Court for revocation of the order and the Court may, if it is satisfied
that it is reasonable to do so, revoke the order and any order by which it
has been altered or varied. (4) Any person who contravenes an order under
subsection (1) shall be guilty of an offence and shall be liable on
conviction to a fine of $ 5,000.
(5) Without prejudice to the powers of the Attorney General in relation to
the prosecution of criminal offences, a prosecution under this section
shall not be instituted except with the consent in writing of the
Commission.
PART XII PREVENTION OF IMPROPER TRADING PRACTICES
Offences
135. False markets and trading
(1) A person shall not intentionally create or cause to be created, or do
anything with the intention of creating-
(a) a false or misleading appearance of active trading in any securities
on the Unified Exchange; or
(b) a false market in respect of any securities on the Unified Exchange.
(Amended 58 of 1985 s. 84)
(2) For the purposes of subsection (1) (b), a false market is created in
relation to securities when the market price of those securities is raised
or depressed or pegged or stabilized by means of-
(a) sales and purchases transacted by persons acting in collaboration with
each other for the purpose of securing a market price for those securities
that is not justified either by the assets of the corporation which issued
the securities or by the profits (including anticipated profits) of the
corporation;
(b) any act which has the effect of preventing or inhibiting the free
negotiation of market prices for the purchase or sale of the securities;
or
(c) the employment of any fictitious transaction or device or any other
form of deception or contrivance.
(3) A person shall not with the intention of depressing, raising, or
causing fluctuations in the market price of any securities effect any
purchase or sale of any such securities which involves no change in the
beneficial ownership of those securities.
(4) A purchase or sale of securities involves no change in beneficial
ownership within the meaning of subsection (3) if a person who held an
interest in the securities before the purchase or sale, or a person
associated with him in relation to those securities, holds an interest in
the securities after the purchase or sale. (Amended L. N. 140 of 1974)
(5) A person shall not circulate or disseminate, or authorize or be
concerned in the circulation or dissemination of, any statement or
information to the effect that the price of any securities will or is
likely to rise or fall because of the market operations of one or more
persons which, to his knowledge, are conducted in contravention of
subsection (1).
136. Employment of fraudulent or deceptive devices, etc.
A person shall not, directly or indirectly, in connection with any
transaction with any other person involving the purchase, sale, or
exchange of securities-
(a) employ any device, scheme, or artifice to defraud that other person;
or (b) engage in any act, practice, or course of business which operates
as a fraud or deception, or is likely to operate as a fraud or deception,
of that other person.
137. Restrictions on fixing, etc. prices for securities
A person shall not, either alone or with one or more other persons, effect
any series of transactions for the purchase or sale of securities, or the
purchase and sale, of any securities for the purpose of pegging or
stabilizing the price of securities of that class in contravention of any
regulations made for the purposes of this section.
138. False or misleading statements about securities
A person shall not, directly or indirectly, for the purposes of inducing
the sale of the securities of any corporation, make with respect to those
securities, or with respect to the operations or the past or future
performance of the corporation-
(a) any statement which is, at the time and in the light of the
circumstances in which it is made, false or misleading with respect to any
material fact and which he knows or has reasonable ground to believe to be
false or misleading; or
(b) any statement which is, by reason of the omission of a material fact,
rendered false or misleading and which he knows or has reasonable grounds
for knowing is rendered false or misleading by reason of the omission of
that fact.
139. Offences and penalty in relation to sections 135 to 138
Any person who contravenes any of the provisions of section 135, 136, 137,
or 138 shall be guilty of an offence and shall be liable on conviction on
indictment to a fine of $ 50,000 and to imprisonment for 2 years.
140. (Repealed 8 of 1978 s. 7)
Action in Tort
141. Liability to pay compensation
(1) A person who contravenes section 135, 136, 137, or 138 shall, in
addition to any liability under section 139, be liable to pay compensation
by way of damages to any person who has sustained pecuniary loss as a
result of having purchased or sold securities at a price affected by the
act or transaction which comprises or is the subject of the contravention.
(2) An action may be brought under subsection (1) in respect of a
contravention referred to in that subsection notwithstanding that no
person has been charged or convicted under section 139 in respect of the
contravention.
(3) Nothing in this section limits or diminishes any liability which any
person may incur under the common law.
PART XII A (Repealed 62 of 1990 s. 40)
PART XIII MISCELLANEOUS PROVISIONS
142. Restriction on use of title "underwriter", etc.
(1) (Repealed 58 of 1985 s. 25)
(2) A person who is not an underwriter shall not-
(a) take or use the title "underwriter"; or
(b) take or use, or have attached to or exhibited at any place, any title
that resembles the title "underwriter" or so closely resembles that title
as to be calculated to deceive.
(3) Any person who contravenes subsection (2) shall be guilty of an
offence and shall be liable on conviction to a fine of $ 5,000. (Amended
58 of 1985 s. 25)
(4) (Repealed 58 of 1985 s. 25)
(5) A person who carries on a business as an insurance underwriter does
not contravene subsection (2) by reason only that he takes or uses the
title "underwriter" in circumstances that make it clear that he is not
holding himself out as being an underwriter within the meaning of section
2.
143. Investment advisory contracts
(1) No investment adviser or investment advisers' partnership shall enter
into an investment advisory contract with any person in Hong Kong (in this
section referred to as his client), or extend or renew any such contract,
or in any way perform any such investment advisory contract entered into,
extended, or renewed after the commencement of this section, if the
contract- (Amended 58 of 1985 s. 26)
(a) provides for remuneration to be paid by the client to the investment
adviser or investment advisers' partnership on the basis of a share of
capital gains of the funds or any part of the funds of the client;
(Amended 58 of 1985 s. 26)
(b) does not include a provision to the effect that an assignment of the
contract by the investment adviser or investment advisers' partnership
shall be made only with the consent of the client; or (Amended 58 of 1985
s. 26)
(c) does not include a provision-
(i) if entered into by an investment advisers' partnership, to the effect
that the partnership will notify the client of any change in the partners
thereof; or (ii) if entered into by an investment adviser who is a
corporation, to the effect that the corporation will notify the client of
any change in the directors thereof, within a reasonable time after the
change. (Replaced 58 of 1985 s. 26) (2) Subsection (1) (a) does not-
(a) prohibit an investment advisory contract which provides for
remuneration based on the total value of a fund averaged over a definite
period, or on definite dates, or taken on a definite date; or
(b) apply to an investment advisory contract with the manager or other
representative of a unit trust or mutual fund corporation authorized by
the Commission for the purposes of this Ordinance, or a company carrying
on business as an investment company and registered under the Companies
Ordinance (Cap. 32), which contract provides for remuneration based on the
asset value of the trust, corporation, or company under management
averaged over a specified period and increasing and decreasing
proportionately in accordance with the performance of the trust,
corporation, or company over a specified period in relation either to-
(i) the investment record of an appropriate index of securities; or
(ii) such other measure of investment performance as the Commission may
specify in writing on the application of either party to a contract or
intended contract. (3) For the purposes of subsection (1) (b) and (c),
"investment advisory contract" means a contract or agreement whereby a
person agrees to act as investment adviser or to manage any investment or
trading account of a client not being a unit trust or mutual fund
corporation authorized by the Commission for the purposes of this
Ordinance, or a company carrying on business as an investment company and
registered under the Companies Ordinance (Cap. 32).
(4) Any investment adviser who knowingly enters into any contract in
contravention of any of the provisions of subsection (1) shall be guilty
of an offence and shall be liable on conviction to a fine of $ 2,000.
(5) Any contract entered into in contravention of any of the provisions of
subsection (1) shall, notwithstanding anything in the contract, be
voidable at the option of the client.
144. Court may make certain orders
(1) Where, on the application of the Commission, it appears to the Court
that a person has contravened this Ordinance or any conditions of
registration thereunder, or is about to do an act with respect to dealing
in securities that, if done, would be such a contravention, the Court may,
without prejudice to any orders it would be entitled to make otherwise
than pursuant to this section, make one or more of the following orders-
(Amended 10 of 1989 s. 65)
(a) an order restraining a person from acquiring, disposing of, or
otherwise dealing with any securities specified in the order;
(b) in relation to a registered dealer or registered dealing partnership,
an order appointing a person to administer the property of the dealer or
the partnership; (Amended 58 of 1985 s. 27)
(c) an order declaring a contract relating to securities to be void or
voidable; (d) for the purpose of securing compliance with any other order
under this section, an order directing a person to do or refrain from
doing a specified act; or (e) any ancillary order which it considers
necessary in consequence of the making of an order under paragraphs (a) to
(d).
(2) The Court shall, before making an order under subsection (1), satisfy
itself, so far as it can reasonably do so, that the order would not
unfairly prejudice any person. (3) The Court may, before making an order
under subsection (1), direct that notice of the application be given to
such persons as it thinks fit or direct that notice of the application be
published in such manner as it thinks fit, or both.
(4) The Court may reverse, vary, or discharge an order made by it under
this section or suspend the operation of such an order.
145. Miscellaneous offences
Any person who-
(a) obstructs the Commission or any other public officer or any person in
the exercise or performance of any power, authority, duty, or function
under this Ordinance; or (b) fails to produce any document that the
Commission or a person authorized by the Commission has, pursuant to any
provision of this Ordinance, required that person to produce for
inspection by the Commission or the person so authorized, shall be guilty
of an offence and shall be liable on conviction to a fine of $ 5,000 and
to imprisonment for 3 months.
(Amended 10 of 1989 s. 65)
146. Regulations
(1) The Commission may make rules for all or any of the following matters-
(Amended 10 of 1989 s. 65)
(a) - (b) (Repealed 58 of 1985 s. 28)
(c) the class of persons in relation to whom, and the manner and
circumstances in which, registered dealers, registered dealing
partnerships and registered dealers' representatives may deal in
securities; (Amended 58 of 1985 s. 28)
(d) the class of persons in relation to whom, and the manner and
circumstances in which, registered investment advisers, registered
investment advisers' partnerships and registered investment
representatives may carry on business as investment advisers or as
investment representatives, as the case may be; (Amended 58 of 1985 s. 28)
(e) prescribing the amount of deposit required to be made for the purposes
of section 52, and providing for the application of deposits under
subsections (3) and (4) of that section;
(f) requiring registered dealers, registered dealing partnerships,
registered investment advisers and registered investment advisers'
partnerships to exhibit their certificates of registration at their places
of business; (Amended 58 of 1985 s. 28) (g) prescribing the information to
be notified for the purposes of section 63 (1) (b); (h)-(j) (Repealed 58
of 1985 s. 28)
(k) prescribing the manner, time, or circumstances for retaining copies of
circulars for the purposes of section 79 (6); (Amended 58 of 1985 s. 28)
(l) prescribing the particulars to be recorded in relation to accounts
kept under section 84;
(m) prescribing the particulars to be recorded in relation to the profit
and loss account and balance sheet and the information to be contained in
the auditor's report required to be lodged under section 88; (Replaced 62
of 1976 s. 34)
(n) prescribing any matters for giving better effect to section 65B and,
without derogation from the generality of the foregoing, may for that
purpose-
(i) prescribe the returns to be made by registered dealers and registered
dealing partnerships, the information to be included therein and the
manner in which such information is to be verified;
(ii) provide for the manner in which any assets are to be valued and for
the payment by any person of the costs of valuation;
(iii) provide for the manner in which records are to be kept of any assets
which may be taken into account for the purposes of section 65B and the
places at which such records are to be maintained; and
(iv) make separate provision for different classes or categories of
registered dealer or registered dealing partnership; (Replaced 58 of 1985
s. 86)
(o) (Repealed 58 of 1985 s. 28)
(p) (Repealed 10 of 1989 s. 65)
(q) prescribing public offices for the purposes of section 122; (Amended
33 of 1988 s. 3)
(r) prescribing the procedure for the holding of investigations under Part
XI, and providing for the reception of evidence, whether written or oral,
and for the summoning and examination of witnesses, during the course of
such an investigation; (s) prescribing anything which is to be or may be
prescribed by regulations. (2) Where rules are made by the Commission
under subsection (1), the Governor in Council may make regulations
providing that a contravention of specified provisions of the rules shall
be an offence and may provide penalties therefor not exceeding a fine of
$ 2,000 and imprisonment for 3 months. (Replaced 10 of 1989 s. 65)
(3) Except as otherwise provided in this Ordinance, regulations made under
this section may be of general or special application.
(4) Regulations made under this section may provide that, subject to such
terms and conditions as may be prescribed thereby, the provisions of Parts
VI to IX, or such of them as are specified in the regulations-
(a) shall not have effect in relation to any specified person or to any
person who is a member of a specified class of persons-
(i) who is or may be a dealer or investment adviser by reason only of his
doing anything that is incidental to another business;
(ii) who does not deal in securities for or on behalf of any other person;
or (iii) who is a dealer or investment adviser by reason only of his
entering into any specified transaction or class of transactions;
(b) shall not have effect in relation to a representative of any such
person, or a member of any such class of persons, as is referred to in
paragraph (a);
(c) shall have effect in relation to any such person or member, or a
representative of any such person or member, to such extent as is
prescribed; or
(d) shall not have effect in relation to a specified transaction or class
of transaction entered into by a specified person or class of persons.
146A. Rules by the Commission
(1) The Commission may make rules for all or any of the following matters-
(a) the conduct of business by registered dealers, registered investment
advisers, registered dealing partnerships, registered investment advisers'
partnerships, registered dealers' representatives and registered
investment representatives; (b) matters incidental to the registration of
dealers, investment advisers, dealing partnerships, investment advisers'
partnerships, dealers' representatives and investment representatives
under this Ordinance;
(c) prescribing the particulars to be recorded in relation to registered
dealers, registered investment advisers, registered dealing partnerships,
registered investment advisers' partnerships, registered dealers'
representatives and registered investment representatives under section
64;
(d) enabling the Commission to correct any errors in any register kept
under this Ordinance; (Amended 10 of 1989 s. 65)
(e) enabling the Commission, on payment of the fee (if any) prescribed
under the regulations, to issue duplicate certificates of registration in
the event of loss or destruction of the original certificate or any
duplicate certificate; (Amended 10 of 1989 s. 65)
(f) prescribing forms for the purposes of this Ordinance;
(g) prescribing the manner in which applications are to be made for
registration under Part VI;
(h) prescribing anything which is to be or may be prescribed by rules
under this section.
(2) Rules made under this section may be of general or special
application. (Added 58 of 1985 s. 29)
147. Liability of directors, etc.
(1) Where an offence under this Ordinance committed by a corporation is
proved to have been committed with the consent or connivance of, or to be
attributable to any neglect on the part of, any director, manager,
secretary, or other similar officer of the corporation, or any person who
was purporting to act in any such capacity, he, as well as the
corporation, shall be guilty of the offence and shall be liable to be
proceeded against and punished accordingly.
(2) Subject to subsection (3), for the purposes of this section, a person
is deemed to be a director of a corporation if he occupies the position of
a director by whatever name he may be called or is a person in accordance
with whose directions or instructions the directors of the corporation or
any of them act.
(3) A person shall not, by reason only that the directors of a corporation
act on advice given by him in a professional capacity, be taken to be a
person in accordance with whose directions or instructions those directors
act.
(4) Where an offence committed by a partner in a partnership is proved to
have been committed with the consent or connivance of, or to be
attributable to any neglect on the part of, any other partner of the
partnership, that other partner shall be guilty of the offence and liable
to be proceeded against and punished accordingly. (Added 58 of 1985 s. 30)
148. Commission may prosecute certain offences against this Ordinance
Without prejudice to the provisions of any other enactment relating to the
prosecution of criminal offences and without prejudice to the powers of
the Attorney General in relation to the prosecution of such offences, the
Commission may institute proceedings in respect of any offence against
this Ordinance that is punishable on summary conviction.
(Amended 10 of 1989 s. 65)
148A. Limitation on commencement of proceedings
(1) Notwithstanding section 26 of the Magistrates Ordinance (Cap. 227), an
information or complaint relating to an offence under this Ordinance may
be tried if it is laid or made, as the case may be, at any time within 3
years after the commission of the offence or within 12 months after the
first discovery thereof by the prosecutor, whichever period expires first.
(2) This section shall not apply in relation to an offence committed
before the commencement of the Securities (Amendment) Ordinance 1991 (6 of
1991). (Added 5 of 1991 s. 2)
149. Amendment of Schedules and certain specified amounts
The Governor in Council may, by order published in the Gazette, amend-
(a) Schedules 1 and 2; and
(b) any amount or sum specified in Part X.
150. (Repealed 10 of 1989 s. 65)
SCHEDULE 1 [ss. 72 & 149] REQUIREMENTS TO BE SATISFIED IN RELATION TO OFFERS TO ACQUIRE SECURITIES
1. If the securities to be acquired are currently listed or quoted on the
Unified Exchange or a foreign stock exchange, the offer shall, subject to
paragraph 2, -(Amended 58 of 1985 s. 87)
(a) state this fact and specify the exchange or exchanges on which the
securities are currently listed or quoted;
(b) specify the last recorded price paid in respect of the securities on
the Unified Exchange, or, in the case of a foreign stock exchange, listed
or quoted, on the latest practicable date during the period of 3 months
immediately preceding the date of the offer; (Replaced 62 of 1976 s. 35.
Amended 58 of 1985 s. 87)
(c) specify the last price paid in respect of the securities on the last
trading day of each of the 6 months immediately preceding the date of the
offer;
(d) specify the highest and the lowest prices paid in respect of the
securities during the period of 6 months immediately preceding the date of
the offer;
(e) where the offer has been the subject of a public announcement, whether
in a newspaper or in any other form of news medium or otherwise, specify
the last price paid in respect of the securities on the last trading day
during the period of 3 months immediately preceding the public
announcement, or, if the securities were not dealt in during that period,
this should be stated. (Amended 62 of 1976 s. 35)
2. If the securities proposed to be acquired are not listed or quoted on
the Unified Exchange or a foreign stock exchange, the offer shall contain-
(Amended 58 of 1985 s. 87)
(a) any information that the offeror may have as to the number and nominal
value of those securities that have been sold in Hong Kong during the
period of 6 months immediately preceding the date of the offer and the
prices yielded by those sales, or, where the offeror has no such
information, a statement to that effect; and (b) particulars of any
restriction in the constitution of the corporation which issued the
securities on the right to transfer the securities which has the effect of
requiring the offerees, before transferring securities held by them in the
corporation, to offer those securities for purchase to members of the
corporation or to any other person, and, where there is any such
restriction, the arrangements (if any) being made to enable the securities
to be transferred in pursuance of the offer.
3. Where the securities proposed to be acquired are those of a corporation
incorporated outside Hong Kong and any holders of those securities reside
in Hong Kong, and those securities are listed or quoted on a stock
exchange of the country or territory in which the corporation is
incorporated, the offer shall state this fact and specify the stock
exchange on which they are listed or quoted.
4. The offer shall contain, in a prominent position in printing not
smaller than eight point Times, a notice in the following form-
"IMPORTANT
If you are in doubt as to any aspect of this offer, you should consult a
stockbroker or other registered dealer in securities, a bank manager,
solicitor, professional accountant, or other professional adviser."
SCHEDULE 2 [SS. 72 & 149] REQUIREMENTS TO BE SATISFIED IN RELATION TO OFFERS TO DISPOSE OF SECURITIES
1. If the securities offered are currently listed or quoted on the Unified
Exchange or a foreign stock exchange and will be uniform in all respects
with the securities so currently listed or quoted, the offer shall-
(Amended 58 of 1985 s. 88) (a) state that fact and specify the exchange on
which those securities, or the securities with which they will be uniform,
are currently listed or quoted; (b) specify the last recorded price paid
in respect of the securities on the Unified Exchange, or, in the case of a
foreign stock exchange, listed or quoted, on the latest practicable date
during the period of 3 months immediately preceding the date of the offer;
(Replaced 62 of 1976 s. 35. Amended 58 of 1985 s. 88)
(c) specify the last price paid in respect of the securities on the last
trading day of each of the 6 months immediately preceding the date of the
offer;
(d) specify the highest and the lowest prices paid in respect of the
securities during the period of 6 months immediately preceding the date of
the offer;
(e) where the offer has been the subject of a public announcement,
whether, in a newspaper or in any other form of news medium or otherwise,
specify the last price paid on the last trading day during the period of 3
months immediately preceding the public announcement, or, if the
securities were not dealt in during that period, this should be stated.
(Amended 62 of 1976 s. 35)
2. Where the securities offered are those of a corporation incorporated
outside Hong Kong and-
(a) are listed or quoted on a stock exchange in the country or territory
where the corporation was incorporated; or
(b) are yet to be issued but will be in all respects uniform with the
securities already so listed or quoted,
the offer shall specify that fact and the name of the stock exchange on
which those securities, or the securities with which they will be uniform,
are so listed or quoted.
3. The offer shall, in the case of securities of a corporation which are
not listed or quoted on the Unified Exchange or a foreign stock exchange,
or which are not uniform in all respects with securities so listed or
quoted, - (Amended 58 of 1985 s. 88) (a) give particulars of any
restriction in the corporation's constitution which has the effect of
requiring a holder of the corporation's securities to offer them for
purchase to members of the corporation or any other person before
transferring them in pursuance of the offer;
(b) except where the offer is accompanied by a document which conforms
with Part II or XII of the Companies Ordinance (Cap. 32) in relation to
the corporation whose securities are the subject of the offer, contain the
particulars specified in paragraph 4 of this Schedule or be accompanied by
a statement in writing containing those particulars.
4. (1) The particulars referred to in paragraph 3 (b) are as follows-
(a)
(i) the year in which, and the country or territory in which, the
issuing corporation was incorporated;
(ii) the address of its registered or principal office in Hong Kong; and
(iii) where the issuing corporation is incorporated outside Hong Kong, the
address of its registered or principal office in the country or territory
in which it was incorporated or is resident;
(b)
(i) the authorized capital of the issuing corporation;
(ii) the amount of the authorized capital of the corporation that has been
issued and is outstanding at the date specified as being the close of the
5 financial years of the corporation immediately preceding the date of the
offer;
(iii) the classes of shares into which that capital is divided;
(iv) the rights of each class of shareholder in respect of capital,
dividends and voting; and
(v) the number and total nominal value respectively of shares issued for
cash and shares issued as fully or partly paid up for a consideration
other than cash;
(c)
(i) the number and total nominal value of shares
issued since the close of the last financial year of the issuing
corporation;
(ii) the classes (if any) into which the shares are divided and the rights
of each class of shareholder in respect of capital, dividends and voting;
(iii) the number and total nominal value respectively of shares issued as
fully or partly paid up for cash or as fully or partly paid up for a
consideration other than cash, or both;
(iv) the number of redeemable preference shares (if any) redeemed and the
amounts repaid in respect of the shares so redeemed; and
(v) particulars of any reduction of capital lawfully authorized in respect
of the corporation;
(d) particulars of any reorganization of the capital of the issuing
corporation during each of its 2 financial years preceding the date of the
offer;
(e)
(i) the amount of the net profit or loss of the issuing corporation
(before taking into account any form of tax calculated by reference to the
amount of profits of the corporation);
(ii) the rate per cent of dividends paid by the issuing corporation and
the amount distributed by way of dividends on each class of shares during
each of the 5 financial years immediately preceding the offer; and
(iii) where no dividend has been paid in respect of shares of any
particular class during any of those years, a statement to that effect;
(f) the total amount of any debentures issued by the issuing corporation
and outstanding not more than 28 days before the date of the offer, and
the total amount of mortgage debts, loans, or charges due from the
corporation not more than 28 days before that date, together with the rate
of interest payable in respect of them;
(g) the names and addresses of the directors of the issuing corporation;
(h) the number, description, and nominal value of the securities of the
issuing corporation held by or on behalf of each of its directors or, if a
director does not hold any such securities and no securities are held on
his behalf, a statement to that effect; and
(i) whether or not the securities offered are, or, in the case of
securities to be issued, will be, fully paid up, and, if not, to what
extent they are or will be paid up, and, if the issuing corporation has
fixed a date and amount for payment of outstanding calls, the date and
amount of each such call.
(2) If any of the particulars required by subparagraph (1) are not
available by reason of the issuing corporation not having carried on
business for a sufficient length of time, or for any other reason, the
offer shall state that fact; and if the issuing corporation is one
incorporated in Hong Kong in respect of which those particulars are not
available in the returns of the corporation filed with the Registrar of
Companies, the offer shall also state that fact.
5. If the securities offered are yet to be issued, the offer shall-
(a) state-
(i) whether or not the issue requires the authority of a resolution of the
issuing corporation;
(ii) the first dividend in which the securities will participate; and
(iii) whether or not there has been, to the knowledge of the offeror, any
material change in the financial position of the issuing corporation since
the date of the balance sheet and profit and loss account of the
corporation for the financial year preceding the date of the offer and, if
so, particulars of the change;
(b) be accompanied by copies of the balance sheet and profit and loss
account of the corporation (if any) made up to the end of the last
financial year of the corporation preceding the date of the offer;
(c) be accompanied by copies of the memorandum and articles of association
or other document constituting or defining the constitution of the issuing
corporation unless the offer specifies-
(i) a place in Hong Kong at which copies of those documents may be
inspected by offerees; and
(ii) the times at which they may be inspected;
(d) in the case of securities which will be uniform in all respects with
previously issued securities of the issuing corporation that are not
currently listed on the Unified Exchange or a foreign stock exchange give
any information that the offeror may have as to the number and nominal
value of those securities which have been sold during the period of 6
months preceding the date of the offer, and the prices yielded from the
sales or, if the offeror has no such information, state that fact;
(Amended 58 of 1985 s. 88)
(e) in the case of securities which will not be uniform in all respects
with securities previously issued by the issuing corporation, state-
(i) the respects in which the securities will differ from the previously
issued securities;
(ii) whether or not any voting rights will attach to the securities and,
if so, the limitations (if any) on those rights; and
(iii) whether or not application for permission to have the securities
listed or quoted has been or will be made to the Unified Exchange or a
foreign stock exchange and, if such an application has been made, the name
of the exchange applied to. (Amended 58 of 1985 s. 88)
6. The offer shall contain in a prominent position, in printing not
smaller than eight point Times, a notice in the following form- (Amended
L. N. 56 of 1974)
"IMPORTANT
If you are in doubt as to any aspect of this offer, you should consult a
stockbroker or other registered dealer in securities, a bank manager,
solicitor, professional accountant, or other professional adviser."
SCHEDULE 3 [ss. 141G & 141I] (Repealed 62 of 1990 s. 40)
| 1 | 2 | 3 | 4 | |