SECURITIES ORDINANCE

SECURITIES ORDINANCE (CHAPTER 333) CONTENTS Section PART I PRELIMINARY MATTERS 1. Short title 2. Interpretation 3. Saving for certain transactions 4. Definition of related corporation 5. Interests in securities PART II SECURITIES AND FUTURES COMMISSION 6-13. (Repealed) 14. Rules 15. Commission may authorize mutual fund corporations and unit trusts 16-19. (Repealed) PART III STOCK MARKETS 20. Restriction on establishment of stock markets 21. Restriction on use of the title "stock exchange", etc.

22. Dealer not to deal in securities in a stock market that is not the Unified Exchange 23. Power of entry and search, etc.

24. Power to order closure 25. (Repealed) 26. Suspension of dealings for misconduct, etc.

27. Commission may order closure of Unified Exchange in emergencies, etc.

28. Publication of direction or order in the Gazette 29. Appeal against direction, etc.

30. (Repealed) PART IV 31-37. (Repealed) PART V 38-46. (Repealed) PART VI REGISTRATION OF DEALERS, INVESTMENT ADVISERS, AND REPRESENTATIVES, ETC.

47. Application of part VI 48. Registration as a dealer 49. Registration as an investment adviser 49A. Registration as a dealing partnership 49B. Registration as an investment advisers' partnership 49C. Dealing directors only to deal on behalf of registered dealing corporations 49D. Supervisory directors of corporations which are registered investment advisers only to carry on the business of an investment adviser for such corporations 50. Registration as a representative 50A. Partnerships which may be registered as dealing partnerships or investment advisers' partnerships 51. Grant of certificates of registration 51A. (Repealed) 52. Deposit required before registration as a dealer 52A. Accounts of sums deposited under section 52 53. Refusal of registration 53A. Amendment of conditions of certificate of registration 54. (Repealed) 54A. Deemed registration of certain partnerships.

55. Revocation and suspension of certificates of registration in certain cases 56. Powers of Commission in relation to misconduct 57. Effect of revoking or suspending registration 58-59. (Repealed) 60. Exempt dealers 61. Exempt investment advisers 62. Offence to make a false representation for the purpose of obtaining a certificate of registration under this Part 63. Information to be provided by registered person other than a representative, etc.

64. Commission to keep a register of dealers, etc.

65. Publication of names of registered dealers, etc.

PART VIA SPECIAL PROVISIONS RELATING TO DEALERS 65A. Qualifications for registration as a dealer 65B. Capital requirements for dealers 65C. Failure to comply with section 65B 65D. Books, accounts and records to be produced on demand PART VII RECORDS 66. Application of Part VII 67. Certain persons to maintain registers of securities 68. Certain notices to be given to the Commission 69. Defences 70. Power of Commission to require certain information to be supplied to him 71. Power of Commission to supply copy of register PART VIII TRADING IN SECURITIES 72. Offers by dealers 73. Calls by registered dealers 74. Hawking of securities 75. Issue of contract notes 76. Dealers not to engage in option or forward trading 77. Dealers to provide certain information, etc. to client 78. Certain representations prohibited 79. Disclosure of certain interests 80. Short selling prohibited 81. Disposition of security documents PART IX ACCOUNTS AND AUDIT 82. Application and interpretation of Part IX 83. Accounts to be kept by dealers 84. Certain money received by dealer to be paid into a trust account 85. Money in trust account not available for payment of debts, etc.

86. Claims and liens not affected 87. Dealer to appoint auditor 87. Dealer to appoint auditor 87A. Dealer's financial year 87B. Notification of change of auditors 88. Dealer to lodge auditor's report 89. Auditor to send report directly to Commission in certain cases 89A. Communication by auditor with Commission 90. Power of Commission to appoint auditor 91. Power of Commission to appoint an auditor on the application of a client 92. Auditor to report to Commission 93. Powers of auditors 94. Right of auditors and employees to communicate certain matters 95. Books, accounts, and records to be produced on demand 96. Offence to destroy, conceal, or alter records or send records or other property outside Hong Kong 97. Right of committee to impose obligations, etc., on members of Exchange Company not affected by this Part PART X COMPENSATION FUND 98. Interpretation 99. Establishment of compensation fund 100. Securities Compensation Fund Committee 101. Money constituting the compensation fund 102. Money to be kept in bank account 103. Accounts of fund 104. Exchange Company to make deposits in respect of members 105. Balance of sums in bank account may be invested 106. Repayment of deposits in certain cases 107. Replenishment of fund in certain cases 108. Payments out of the fund 109. Claims against the fund 110. Powers of Commission to increase payments made in respect of claims 111. Rights of innocent partner, etc. in relation to the fund 112. Notice calling for claims against the fund 113. Power of the committee of the Exchange Company in respect of claims 114. Committee of the Exchange Company may require production of securities, etc.

115. Court proceedings to establish a claim against the fund 116. Supplementary provisions relating to proceedings brought under section 115 117. Form of court order establishing claim 118. Subrogation of the Commission to rights, etc., of claimant on payment from fund 119. Payment of claims only from the fund 120. Provision where fund is insufficient to meet claims or where claims exceed total amount payable 121. Power of Commission to return contributions on winding up the Exchange Company 121A. Commission may act where committee fails to do so PART XI INSPECTIONS AND INVESTIGATIONS Inspections 122-125. (Repealed) Investigations 126. Interpretation for the purposes of sections 127 to 134 127. Investigation by inspector 128. Notes of examination 129. Delegation of powers, etc., by inspector 130. Report of inspector 131. Privileged communications 132. Cost of investigation 133. Concealing, etc., of books relating to securities 134. Commission may make certain orders PART XII PREVENTION OF IMPROPER TRADING PRACTICES Offences 135. False markets and trading 136. Employment of fraudulent or deceptive devices etc.

137. Restrictions on fixing, etc. prices for securities 138. False or misleading statements about securities 139. Offences and penalty in relation to sections 135 to 138 140. (Repealed) Action in Tort 141. Liability to pay compensation PART XIIA (Repealed) PART XIII MISCELLANEOUS PROVISIONS 142. Restriction on use of title "underwriter", etc.

143. Investment advisory contracts 144. Court may make certain orders 145. Miscellaneous offences 146. Regulations 146A. Rules by the Commission 147. Liability of directors, etc.

148. Commission may prosecute certain offences against this Ordinance 148A. Limitation on commencement of proceedings 149. Amendment of Schedules and certain specified amounts 150. (Repealed) Schedule 1 Requirements to be satisfied in relation to offers to acquire securities Schedule 2 Requirements to be satisfied in relation to offers to dispose of securities Schedule 3 (Repealed) To make provision in relation to stock markets and dealers in securities, to control trading in securities and the business of advising on making investments, and to provide for the protection of investors and associated matters.

(Amended 58 of 1985 s. 32) [Parts I and II: 1 March 1974 L. N. 39 of 1974 Parts III and IV: 1 June 1974 L. N. 107 of 1974 Part V: 11 October 1974 L. N. 209 of 1974 Parts VI and VII: 1 October 1974 L. N. 197 of 1974 Part VIII: 29 November L. N. 247 of 1974 Part IX (other than section 88) 1 January 1977 L. N. 296 of 1976 Section 88: 30 December L. N. 296 of 1977 1976 Part X: 19 August 1974 L. N. 166 of 1974 Part XI: 1 October 1974 L. N. 197 of 1974 Sections 135, 136, 137, 138, 139 and 141 in Part XII 6 March 1974 L. N.

93 of 1974 Part XIIA: 17 February L. N. 8 of 1978 1978 Part XIII: 19 August 1974 L. N. 166 of 1974 PART I PRELIMINARY MATTERS 1. Short title This Ordinance may be cited as the Securities Ordinance.

2. Interpretation (1) In this Ordinance, unless the context otherwise requires- "auditor" means a professional accountant registered and holding a practising certificate under the Professional Accountants Ordinance (Cap. 50); "banker's books" means- (a) books of a banker; (b) cheques, orders for the payment of money, bills of exchange, and promissory notes in the possession of or under the control of a banker; and (c) securities in the possession or under the control of a banker, whether by way of pledge or otherwise; "books" includes accounts and deeds; "business", in relation to a dealer, means the business of dealing in securities; "certificate of registration" means a certificate of registration issued under Part VI; "Commission" means the Securities and Futures Commission established under the Securities and Futures Commission Ordinance (Cap.

24); (Amended 10 of 1989 s. 65) "committee" in relation to the Exchange Company, means the committee, by whatever name called, for the management and control of the Exchange Company; (Replaced 58 of 1985 s. 33) "Company" means a company as defined in section 2 of the Companies Ordinance (Cap. 32), a company to which Part XI of that Ordinance applies, and any body corporate incorporated in Hong Kong having a share capital; "constitution", in relation to a company, means the memorandum and articles of association of the company or other instrument providing the constitution of the company; "corporate member" means a body corporate which is a member of the Exchange Company; (Replaced 58 of 1985 s. 33) "corporation" means any company or other body corporate formed or incorporated either in Hong Kong or elsewhere; but does not include- (a) and body corporate that is incorporated in Hong Kong and is a public authority or an organ or agency of the Crown; (b) any corporation sole; (c) any credit union registered under the Credit Unions Ordinance (Cap. 119); (d) any corporation registered under the Multi-storey Buildings (Owners Incorporation) Ordinance (Cap. 344); (e) any corporation which has been exempted by regulations from the provisions of this Ordinance that affect corporations, or any corporation that belongs to a class of corporations that has been so exempted; "Court" means the High Court; "dealer", subject to section 82 (1), means a person who carries on a business of dealing in securities, whether he carries on any other business or not, and, in the case of a corporation which is a dealer, includes any director of the corporation who actively participates in, or is in any way directly responsible for the supervision of, the corporation's business of dealing in securities; but does not include- (Amended 62 of 1976 s. 2) (a) a solicitor or professional accountant whose carrying on business as a dealer is wholly incidental to the practice of his profession; (b) except where specifically provided in this Ordinance, an exempt dealer; (c) a recognized clearing house; (Added 68 of 1992 s. 20) "dealer's representative" means a person in the employment of, or acting for or by arrangement with, a dealer, not being an exempt dealer who performs for that dealer any of the functions of a dealer (other than work ordinarily performed by an accountant clerk, or cashier) whether his remuneration is by way of salary, wages, commission, or otherwise, but, in the case of a corporation which is a dealer, does not include a director of the corporation; (Replaced 62 of 1976 s. 2) "dealing director" means a director of a corporation who, either alone or with others, actively participates in, or is directly responsible for the supervision of, the corporation's business of dealing in securities; (Added 58 of 1985 s. 2) "dealing in securities", in relation to any person (whether acting as principal or agent), subject to section 3 (1), means making or offering to make an agreement with any other person, or inducing or attempting to induce any other person to enter into or offer to enter into any agreement- (Amended 24 of 1991 s. 2) (a) for or with a view to acquiring, disposing of, subscribing for or underwriting securities; (b) the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; (Amended 62 of 1976 s. 2) "dealing partnership" means a partnership which carries on the business of dealing in securities; (Added 58 of 1985 s. 2) "defalcation" means a misapplication of money, securities, or other property; "director" has the same meaning as in section 2 of the Companies Ordinance (Cap. 32); (Added 62 of 1976 s. 2) "document" includes any register, books, record, tape recording, any form of computer input or output, and any other document or similar material (whether produced mechanically, electrically, or manually, or by any other means whatsoever); "Exchange Company" means the company recognized as the Exchange Company under section 3 of the Stock Exchanges Unification Ordinance (Cap. 361); (Added 58 of 1986 s. 33) "exempt dealer" means a person declared under section 60 to be an exempt dealer for the purposes of this Ordinance; "exempt investment adviser" means a person declared under section 61 to be an exempt investment adviser for the purposes of this Ordinance; (Added 62 of 1976 s. 2) "financial year" means- (a) in the case of a dealer, the period notified by him under section 87A or permitted by the Commission under that section; (Amended 10 of 1989 s. 65) (b) in any other case, a period of 12 months ending on the 31st March in any calendar year; (Replaced 62 of 1976 s. 2) "foreign stock exchange" means a stock exchange which is permitted to operate in a country or territory outside Hong Kong by the law of that country or territory or, in the case of a country or territory which has no written law relating to stock exchanges, is not prevented from operating by the law of that country or territory; "individual member" means a natural person who is a member of the Exchange Company; (Replaced 58 of 1985 s. 33) "investment adviser" means any person who- (a) for remuneration carries on a business of advising other persons concerning securities; (b) for remuneration as part of a regular business issues analyses or reports concerning securities; or (c) for remuneration pursuant to a contract or arrangement with a client, undertakes on behalf of the client the management of a portfolio of securities, including the arranging of purchases, sales, or exchanges of securities through a dealer or exempt dealer, (Amended 10 of 1989 s.

65) and, in the case of a corporation which is an investment adviser, includes any director of the corporation who actively participates in, or is in any way directly responsible for the supervision of, the corporation's business as an investment adviser; but does not include- (i) a licensed bank; (ii) a solicitor or professional accountant whose carrying on business as an investment adviser is wholly incidental to the practice of his profession; (iii) the proprietor or publisher of, or any contributor to, a bona fide newspaper, magazine, journal, or other periodical publication that is generally available to the public, otherwise than on subscription, who, only in that bona fide newspaper, magazine, journal, or periodical publication, advises other persons concerning securities, or issues analyses or reports concerning securities, not being the proprietor or publisher of, or a contributor to, a newspaper, journal, magazine, or other periodical publication whose principal or only object is to advise others concerning securities or to issue analyses or reports concerning securities; (iv) a dealer or exempt dealer to the extent that his giving of investment advice is incidental to his carrying on business as a dealer or exempt dealer; (v) a trustee company registered under Part VIII of the Trustee Ordinance (Cap. 29); (vi) an exempt investment adviser; (Replaced 62 of 1976 s. 2) (vii) a recognized clearing house; (Added 68 of 1992 s. 20) "investment advisers' partnership" means a partnership which carries on the business of an investment adviser; (Added 58 of 1985 s.

2) "investment representative" means a person in the employment of, or acting for or by arrangement with, an investment adviser, not being an exempt investment adviser, who performs for that investment adviser any of the functions of an investment adviser (other than work ordinarily performed by an accountant, clerk or cashier) whether his remuneration is by way of salary, wages, commission, or otherwise, but, in the case of a corporation which is an investment adviser, does not include a director of the corporation; (Replaced 62 of 1976 s. 2) "issue" includes distribute and circulate; (Added 62 of 1976 s. 2) "licensed bank" means a bank licensed under the Banking Ordinance (Cap. 155) to carry on banking business in Hong Kong; "limited partnership" means a limited partner ship registered under the Limited Partnerships Ordinance (Cap. 37); (Added 58 of 1985 s.

2) "listing", in relation to a security, means the procedure whereby a security is listed on the Unified Exchange; (Amended 58 of 1985 s. 33) "market contract" means a market contract within the meaning of section 2 of the Securities (Clearing Houses) Ordinance (Cap. 420); (Added 68 of 1992 s. 20) "member", in relation to the Exchange Company or the Unified Exchange, means a member within the meaning of section 2 of the Stock Exchanges Unification Ordinance (Cap. 361), of the Exchange Company; (Added 58 of 1985 s. 33) "mutual fund corporation" means any corporation which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities and which is offering for sale or has outstanding any redeemable shares of which it is the issuer; "purchase", in relation to any securities, includes subscribing for those securities; "recognized clearing house" means a recognized clearing house within the meaning of section 2 of the Securities (Clearing Houses) Ordinance (Cap. 420) (Added 68 of 1992 s. 20) "registered", in relation to a dealer, dealing partnership, dealer's representative, investment adviser, investment advisers' partnership or investment representative, means registered under this Ordinance; (Amended 58 of 1985 s. 2) "registered company" means a company formed and registered under the Companies Ordinance (Cap. 32); "representative" means a dealer's representative or an investment representative; "rules", in relation to the Exchange Company or the Unified Exchange, means the rules governing the operation and management of the Unified Exchange or the conduct of its members, by whatever name they may be called and wherever contained; (Replaced 58 of 1985 s. 33) "securities" means any shares, stocks, debentures, loan stocks, funds, bonds, or notes of, or issued by, any body, whether incorporated or unincorporated, or of any government or local government authority; and includes- (Amended 62 of 1976 s. 2) (a) rights, options, or interests (whether described as units or otherwise) in or in respect of any of the foregoing; (b) certificates of interest or participation in, or temporary or interim certificates for, receipts for, or warrants to subscribe to or purchase, any of the foregoing; or (c) any instruments commonly known as securities; but does not include- (i) any shares or debentures of any company which is a private company within the meaning of section 29 of the Companies Ordinance (Cap. 32); (ii) any interest arising under a partnership agreement or proposed partnership agreement (other than an agreement creating a limited partnership), unless the agreement or proposed agreement relates to an undertaking, scheme, enterprise, or investment contract promoted by or on behalf of a person whose ordinary business is or includes the promotion of similar undertakings, schemes, enterprises, or investment contracts, whether or not that person is, or is to become, a party to the agreement or proposed agreement, or unless the agreement is or would be an agreement, or is or would be within a class of agreements, prescribed by regulations for the purposes of this paragraph; (iii) any negotiable receipt or other negotiable certificate or document evidencing the deposit of a sum of money, or any rights, or interest arising under any such receipt, certificate, or document; (iv) any bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap. 19) and any promissory note within the meaning of section 89 thereof; (Added 62 of 1976 s. 2) (v) any debenture that specifically provides that it is not negotiable or transferable; (Added 62 of 1976 s. 2) "share" means a share in the capital of a corporation; and includes the stock or any part of the stock of a corporation; "stockbroker" means a member of the Exchange Company; (Replaced 58 of 1985 s. 33) "stock market" means a place where persons regularly meet together to negotiate sales and purchases of securities (including prices), or a place at which facilities are provided for bringing together sellers and purchasers of securities; but does not include the officer of- (a) a stockbroker; (b) a registered dealing partnership of which a stockbroker is a partner; or (c) a recognized clearing house; (Amended 58 of 1985 s. 33; 68 of 1992 s. 20) "title" includes name or description; "trust account" means a trust account established under section 84; "underwriter" means a person who for remuneration undertakes to subscribe for or purchase on specified terms such specified securities as are offered to the public by a person issuing or selling those securities, but are not subscribed for or purchased by the public; (Amended L. N. 377 of 1981) "Unified Exchange" or "exchange" means the stock market established under section 27 of the Stock Exchanges Unification Ordinance (Cap. 361); (Added 58 of 1985 s. 33) "unit trust" means any arrangement made for the purpose, or having the effect, of providing facilities for the participation by persons, as beneficiaries under a trust, in profits or income arising from the acquisition, holding, management of disposal of securities or any other property whatsoever.

(2) In this Ordinance a reference to securities of a corporation is a reference to securities- (a) issued, made available, or granted by the corporation; (b) proposed to be issued, made available, or granted by the corporation; or (c) proposed to be issued, made available, or granted by the corporation when it is formed.

(3) In this Ordinance a security is regarded as listed on the Unified Exchange when the exchange has on the application of the company which issued the security, or on the application of any holder of the security, agreed to allow, subject to the requirements of this Ordinance, dealings in that security to take place on the Unified Exchange. (Amended 58 of 1985 s. 33) (4) (Repealed 58 of 1985 s. 2) 3. Saving for certain transactions (1) For the purpose of determining whether or not a person has dealt in securities or has communicated an offer to acquire or dispose of securities, no account shall be taken of an act done on behalf of that person by, or of an offer made by that person to, a registered dealer, a dealer's representative, an exempt dealer or an exempt dealer's representative or of that person having (whether as principal or as agent) - (Amended 24 of 1991 s. 2) (a) (Repealed 24 of 1991 s. 3) (b) issued a prospectus which complies with, or is exempt from compliance with, Part II of the Companies Ordinance (Cap. 32), or in the case of a company incorporated outside Hong Kong, complies with or is exempted from compliance with Part XII of that Ordinance; (c) issued any document relating to securities of a corporation incorporated in Hong Kong that is not a registered company, being a document which- (i) would if the corporation were a registered company be a prospectus to which section 38 of the Companies Ordinance (Cap. 32) applies, or would apply if not excluded by subsection (5) (b) of that section or by section 38A of that Ordinance; and (ii) contains all the matters which, by virtue of Part XII of that Ordinance, it would be required to contain if the corporation were a company incorporated outside Hong Kong and the document were a prospectus issued by that company; (d) issued a form of application for shares or debentures of a company, together with- (i) a prospectus which complies with, or is exempt from compliance with, Part II of the Companies Ordinance (Cap. 32) or, in the case of a company incorporated outside Hong Kong, complies with or is exempt from compliance with Part XII of that Ordinance; or (ii) in the case of a corporation incorporated in Hong Kong which is not a registered company, a document which contains the matters specified in paragraph (c) (ii); (e) issued a prospectus which has been approved by the Commission in relation to a mutual fund corporation or unit trust authorized by the Commission under section 15; (f) issued a form of application for the shares of a mutual fund corporation or the units of a unit trust, being a mutual fund corporation or unit trust which has been authorized by the Commission under section 15, together with a prospectus approved by the Commission; (g) Entered into a market contract, (Added 68 of 1992 s. 20) or of his having as principal, acquired, subscribed for, or underwritten securities, or effected transactions with a person whose business involves the acquisition and disposal, or the holding, of securities (whether as principal or as agent).

(1A) Without prejudice to the generality of the definition of "dealing in securities" in section 2 (1), a person shall be regarded as dealing in securities if in return for a commission, rebate or other remuneration, he- (a) receives from another person an offer to effect a dealing or to acquire or dispose of securities, and communicates it, either in his name or in the name of the person from whom the offer is received, to a registered dealer, a dealer's representative, an exempt dealer or an exempt dealer's representative; (b) effects an introduction between a registered dealer, a dealer's representative, an exempt dealer or an exempt dealer's representative and another person, in order that other person may effect a dealing or make an offer to acquire or dispose of securities; or (c) on behalf of another person- (i) effects a dealing through a registered dealer, a dealer's representative, an exempt dealer or an exempt dealer's representative; or (ii) makes an offer to a registered dealer, a dealer's representative, an exempt dealer or an exempt dealer's representative to acquire or dispose of securities, and subsection (1) shall be construed and have effect accordingly. (Added 24 of 1991 s. 3) (2) The Commission may, on application being made to it in that behalf, approve a prospectus for the purposes of subsection (1) (e).

(3) Any approval under subsection (2) may be given subject to such conditions as the Commission thinks fit.

(Amended 10 of 1989 s. 65) 4. Definition of related corporation (1) Where a corporation- (a) is the holding company of another corporation; (b) is a subsidiary of another corporation; or (c) is a subsidiary of the holding company of another corporation, that first-mentioned corporation and that other corporation are, for the purposes of this Ordinance, deemed to be related to each other.

(2) For the purposes of subsection (1), a corporation shall, subject to subsection (3), be deemed to be a subsidiary of another corporation if- (a) that other corporation- (i) controls the composition of the board of directors of the first-mentioned corporation; (ii) controls more than half of the voting power of the first- mentioned corporation; or (iii) holds more than half of the issued share capital of the first-mentioned corporation (excluding any part which carries no right to participate beyond a specified amount on a distribution of either profits or capital); or (Amended L. N. 140 of 1974) (b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary.

(3) For the purposes of subsection (2), the composition of a corporation's board of directors shall be deemed to be controlled by another corporation if that other corporation by the exercise, of some power exercisable by it, without the consent or concurrence of any other person, can appoint or remove all or a majority of the directors, and for the purposes of this provision, that other corporation shall be deemed to have power to appoint or remove a director if- (Amended 62 of 1976 s. 3) (a) a person cannot be appointed as a director without the exercise in his favour by that other corporation of such a power; or (b) a person's appointment as a director follows necessarily from his being a director or other officer of that other corporation.

(4) In determining whether one corporation is a subsidiary of another corporation- (a) any shares held by or power exercisable by that other corporation in a fiduciary capacity shall be treated as not held or exercisable by it; (b) subject to paragraphs (c) and (d), any shares held or power exercisable- (i) by any person as a nominee for that other corporation (except where that other corporation is concerned only in a fiduciary capacity); or (ii) by, or by a nominee for, a subsidiary of that other corporation, not being a subsidiary which is concerned only in a fiduciary capacity, shall be treated as exercisable by that other corporation; (Amended L. N. 56 of 1974) (c) any shares held or power exercisable by any person by virtue of the provisions of any debenture of the first-mentioned corporation or of a trust deed for securing any issue of any such debenture shall be disregarded; and (d) any shares held or power exercisable by, or by a nominee for, that other corporation or its subsidiary (not being held or exercisable as mentioned in paragraph (c) shall be treated as not held or exercisable by that other corporation if the ordinary business of that other corporation or its subsidiary, as the case may be, includes the lending of money and the shares are held or power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

5. Interests in securities (1) Subject to this section, a person has an interest in securities for the purposes of sections 19, 67, 79 and 135 if he has authority (whether formal or informal or express or implied) to dispose of, or to exercise control over the disposal of, those securities.

(Amended 8 of 1978 s. 2; 62 of 1990 s. 38) (2) It is immaterial for the purposes of subsection (1) that the authority of a person to dispose of, or to exercise control over the disposal of, particular securities is, or is capable of being made, subject to restraint or restriction.

(3) For the purposes of subsection (1), a person shall not be deemed not to have authority to dispose of, or to exercise control over the disposal of, particular securities by reason only that his authority is exercisable jointly with another person.

(4) For the purposes of subsection (1), where a corporation has authority (whether formal or informal or express or implied) to dispose of, or to exercise control over the disposal of, securities and- (a) the corporation is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions of a person in relation to those securities; or (b) a person, or an associate of a person, has a controlling interest in the corporation, that person shall be deemed to have authority to dispose of, or to exercise control over the disposal of, those securities.

(5) For the purposes of subsection (4) of this section, and of subsection (4) of section 135, a person is an associate of another person if the first-mentioned person is- (a) a corporation that, by virtue of section 4, is deemed to be related to that other person; (b) a person in accordance with whose directions that other person is accustomed or is under an obligation, whether formal or informal, to act in relation to the securities referred to in those subsections; (c) a person who is accustomed or is under an obligation, whether formal or informal, to act in accordance with the directions of that other person in relation to those securities; (d) a corporation that is, or the directors of which are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions of that other person in relation to those securities; or (e) a corporation in accordance with the directions of which, or of the directors of which, that other person is accustomed or under an obligation, whether formal or informal, to act in relation to those securities.

(6) Where a person- (a) has entered into a contract to purchase securities; (b) has a right to have securities transferred to him or to his order, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not; or (c) has the right to acquire securities, or an interest in securities, under an option, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not, that person shall, to the extent to which he could do so on completing the contract, enforcing the right or exercising the option, be deemed to have authority to dispose of, or to exercise control over the disposal of. those securities.

(7) There shall be disregarded- (a) for the purposes of section 67, an interest in securities of a person whose ordinary business includes the lending of money if he holds the interest only by way of security for the purposes of a transaction entered into in the ordinary course of business in connection with the lending of money; (b) for the purposes of sections 67 and 79, an interest in securities of a person who holds that interest only by virtue of his having control over the securities as a manager, agent, trustee, or nominee for, or as an employee of, another; (c) where securities referred to in section 135 (4) are subject to a trust, the interest of a trustee in those securities if a person who is not a trustee has an interest in those securities by virtue of subsection (6) (b) of this section; (Amended 68 of 1992 s. 20) (d) for the purposes of any prescribed provision of section 19, 67, 79 or 135, a prescribed interest in securities, being an interest of such person, or of the persons included in such class of persons, as is prescribed by regulations; and (Amended 62 of 1976 s. 4; 8 of 1978 s. 2; 62 of 1990 s. 38; 68 of 1992 s. 20) (e) for the purposes of section 67, an interest in securities of a person who holds that interest only as a result of having entered into a market contract. (Added 68 of 1992 s. 20) PART II SECURITIES AND FUTURES COMMISSION 6-13. (Repealed 10 of 1989 s. 65) 14. Rules (1) The Commission may, after consultation with the Exchange Company, make rules in respect of all or any of the following matters- (Amended 58 of 1985 s. 35) (a) the listing of securities on the Unified Exchange, and in particular- (i) prescribing the requirements to be met before securities may be listed on the Unified Exchange; (ii) prescribing the procedure for dealing with applications for the listing of securities on the Unified Exchange; and (iii) providing for the cancellation of the listing of any specified securities on the Unified Exchange if the Commission's requirements for listing, or the requirements of the undertaking referred to in paragraph (f), are not complied with or the Commission considers that such action is necessary to maintain an orderly market in Hong Kong; (Amended 58 of 1985 s. 35) (b) the conditions subject to which, and the circumstances in which, the Exchange Company shall suspend dealings in securities; (Amended 62 of 1976 s. 5; 58 of 1985 s. 35) (c) the procedure for and the method of allotment of any securities arising out of an offer made to members of the public in respect of those securities; (d) the maximum number of persons who may be admitted to membership of the Exchange Company; (Replaced 58 of 1985 s. 35) (e) the type of business that may be carried on at the Unified Exchange; (Amended 58 of 1985 s. 35) (f) requiring companies the securities of which are listed or accepted for listing on the Unified Exchange to enter into an undertaking in the form prescribed in the rules with the Exchange Company to provide such information at such times as may be specified, and to carry out such duties in relation to its securities as may be imposed, in the undertaking; (Amended 58 of 1985 ss. 3 & 35) (fa) requiring the chairman of the committee of the Exchange Company who has become aware of any matter which adversely affects, or is likely to adversely affect, the ability of any member of the Exchange Company to meet his obligations as a dealer, to make a report concerning the matter to the Commission as soon as practicable after becoming aware of the matter; (Added 62 of 1976 s. 5. Amended 58 of 1985 s. 35) (fb) requiring the Exchange Company when it expels, or suspends the membership of, any of its members, or requests any of its members to resign his membership, to notify the Commission of that fact within 3 trading days after the expulsion, suspension or making of the request, as the case may be, and, in addition, to cause the expulsion, suspension or request to be notified to the public in such manner and within such period as may be prescribed in the rules; (Added 62 of 1976 s. 5.

Amended 58 of 1985 s. 35) (g) anything which is to be or may be prescribed by rules.

(1A) Rules under this section may provide that a contravention of specified provisions thereof shall be an offence and may provide penalties therefor not exceeding a fine of $ 10,000. (Added 58 of 1985 s. 3) (2) No rules made under this section shall have effect until they have been approved by the Governor and published in the Gazette.

(3) Nothing in this section prevents the Exchange Company from making rules on any matter mentioned in subsection (1) under section 34 of the Stock Exchanges Unification Ordinance (Cap. 361) or the constitution of the Exchange Company if those rules have been approved by the Commission, but any such rules shall have effect only to the extent that they are not repugnant to any rule made by the Commission under subsection (1). (Replaced 58 of 1985 s. 35) 15. Commission may authorize mutual fund corporations and unit trusts (1) The Commission may authorize mutual fund corporations and unit trusts for the purposes of this Ordinance.

(2) An authorization under subsection (1) may be granted subject to such conditions as the Commission considers fair and reasonable.

(Replaced 10 of 1989 s. 65) 16-19. (Repealed 10 of 1989 s. 65) PART III STOCK MARKETS (Amended 58 of 1985 s. 37) 20. Restriction on establishment of stock markets (1) No person shall- (a) establish or operate a stock market that is not the Unified Exchange; or (b) assist in the operation of a stock market that, to his knowledge, is not the Unified Exchange. (Replaced 58 of 1985 s. 38) (2) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $500,000 and, in the case of a continuing offence, to a further fine of $ 50,000 for each day during which the offence continues.

21. Restriction on use of the title "stock exchange", etc.

(1) Subject to section 42 (2) of the Stock Exchanges Unification Ordinance (Cap. 361), no person, other than the Exchange Company, shall- (a) take or use the title "stock exchange" or "unified exchange" or "unified stock exchange" or "united exchange" or "united stock exchange"; or (b) take or use, or have attached to or exhibited at any place, any title which resembles any of the titles referred to in paragraph (a) or which so closely resembles any of such titles as to be calculated to deceive. (Replaced 58 of 1985 s. 39) (2) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $ 100,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for each day during which the offence continues.

22. Dealer not to deal in securities in a stock market that is not the Unified Exchange Any dealer who transacts a dealing in securities at or through a stock market in Hong Kong which, to his knowledge, is not the Unified Exchange shall be guilty of an offence, and shall be liable on conviction to a fine of $ 50,000 in respect of each such dealing.

(Amended 58 of 1985 s. 40) 23. Power of entry and search, etc.

(1) Any authorized officer may, with the assistance of such other officers as may be necessary, without warrant- (a) enter and search any premises in which he reasonably suspects that an offence against section 20 or 22 is being or has been committed; and (b) remove and detain any thing which he has reason to believe is evidence of the commission of the offence.

(2) Any such officer may, in the exercise of the powers conferred on him under subsection (1)- (a) break open any outer or inner door of any premises which he is empowered to enter under that subsection; (b) remove by force any person or thing obstructing him in the exercise of any such powers; (c) detain any person found in the premises until they have been searched.

(3) In this section "authorized officer" means an authorized officer of the Commission or any police officer not below the rank of superintendent.

(4) The provisions of section 102 of the Criminal Procedure Ordinance (Cap. 221) (which makes provision for the disposal of property connected with offences) shall apply to any thing which has come into the possession of the Commission under this section in the same way as it applies to property which has come into the possession of the police.

(Amended 10 of 1989 s. 65) 24. Power to order closure (1) If any person is charged with an offence against section 20, a magistrate may, on application made by or on behalf of the Commission, order that any premises in which the stock market is alleged to have been operated be locked and secured until the charge is heard and determined.

(2) Any person aggrieved by the making of an order under subsection (1) and having an interest in the premises in respect of which the order was made may apply to a magistrate to have the order discharged; and on the hearing of the application the magistrate may either confirm the order or direct that it be discharged.

(3) An application under subsection (2) shall not be heard unless a copy of the application has been served on the Commission at least 24 hours before the hearing.

(4) If any person is convicted of an offence against section 20, the court may order the premises in which the stock market was operated to be locked and secured for such period not exceeding 3 months as may be specified in the order. (Amended 58 of 1985 s. 41) (5) Where any order under subsection (1) or (4) has been made, any authorized officer may take such steps as may be necessary to ensure that the premises to which the order relates are locked and secured.

(6) Any person who enters or attempts to enter any premises in respect of which an order made under subsection (1) or (4) is in force without the authority of the Commission shall be guilty of an offence and shall be liable on conviction to a fine of $ 50,000.

(7) In this section "authorized officer" means an authorized officer of the Commission or any police officer. (Amended 10 of 1989 s.

65) 25. (Repealed 58 of 1985 s. 42) 26. Suspension of dealings for misconduct, etc.

(1) The Commission may- (a) on any of the grounds specified in section 36 of the Stock Exchanges Unification Ordinance (Cap. 361); and (b) instead of withdrawing its recognition of the Exchange Company pursuant to that section, direct that the premises of the Unified Exchange be closed forthwith for the transaction of dealings in securities and remain closed until the Commission revokes the direction.

(2) (Repealed 10 of 1989 s. 65) (3) The Commission shall give to the Exchange Company not less than 14 days' notice in writing of its intention to issue a direction under subsection (1) and the notice shall specify the grounds therefor.

(4) While a direction under subsection (1) remains in force, the recognition of the Exchange Company given under section 3 of the Stock Exchanges Unification Ordinance (Cap. 361) shall, for the purposes of the application of sections 20, 21 and 22, be deemed to have been withdrawn.

(5) Where any direction under subsection (1) is in force, any authorized officer may take such steps as may be necessary to ensure that the premises to which the direction relates are locked and secured.

(6) Any person who enters or attempts to enter any premises in respect of which a direction under subsection (1) is in force without the authority of an authorized officer shall be guilty of an offence and shall be liable on conviction to a fine of $ 50,000.

(7) Where any direction is issued under subsection (1), that direction shall take effect immediately, notwithstanding that an appeal has been made or may be made under section 29.

(8) In this section "authorized officer" means an authorized officer of the Commission or any police officer. (Replaced 58 of 1986 s.

43. Amended 10 of 1989 s. 65) 27. Commission may order closure of Unified Exchange in emergencies, etc.

(1) Without prejudice to the powers of the Commission under section 26, the Commission may, after consultation with the Exchange Company, order that the Unified Exchange be closed for the transaction of dealings in securities for a period not exceeding 5 bank trading days.

(2) The Commission may make an order under subsection (1) on the ground that, in his opinion, the orderly transaction of business on the Unified Exchange is being or is likely to be prevented because- (a) an emergency or natural disaster has occurred in Hong Kong; or (b) there exists an economic or financial crisis, whether in Hong Kong or elsewhere, or any other circumstances, which is likely to prevent orderly trading on the Unified Exchange.

(3) An order made under subsection (1) may be renewed by a further order for a further period of not more than 10 bank trading days.

(4) Any dealer who deals in securities listed on the Unified Exchange while an order made under subsection (1) or (3) is in force (being an order which has been notified to the committee of the Exchange Company) shall be guilty of an offence and shall be liable on conviction to a fine of $ 50,000.

(5) Where an order under subsection (1) or (3) has been made, the Commission may take such steps as are necessary to secure compliance with the order and may, in particular, cause the premises of the Unified Exchange to be locked and secured.

(6) Any person who, without the authority of the Commission, enters or attempts to enter the premises of the Unified Exchange which have been locked and secured under subsection (5) shall be guilty of an offence and shall be liable on conviction to a fine of $ 20,000.

(Replaced 58 of 1986 s. 43. Amended 10 of 1989 s. 65) 28. Publication of direction or order in the Gazette Where the Commission issues any direction under section 26 (1), the Commission makes any order under section 27 (1) or (3), notice of the direction or order, as the case may be, shall be published in the Gazette.

(Replaced 58 of 1985 s. 43. Amended 10 of 1989 s. 65).

29. Appeal against direction, etc.

(1) Where the Commission has issued a direction under section 26 (1), the Exchange Company may, within 14 days after the publication in the Gazette of notice of the direction, appeal to the Governor in Council against the direction of the Commission but the decision of the Commission shall take effect notwithstanding the fact that an appeal has been made. (Replaced 10 of 1989 s. 65) (2) After considering any appeal under subsection (1) the Governor in Council may confirm, reverse or vary the direction of the Commission and the decision of the Governor in Council shall be final. (Amended 10 of 1989 s. 65) (Replaced 58 of 1985 s. 43) 30. (Repealed 58 of 1985 s. 44) PART IV (Repealed 58 of 1985 s. 45) PART V 38-46. (Repealed 10 of 1989 s. 65) PART VI REGISTRATION OF DEALERS,INVESTMENT ADVISERS, AND REPRE- SENTATIVES, ETC. (Amended 58 of 1985 s. 4) 47. Application of Part VI (1) Except so far as specifically provided, this Part does not apply to an exempt dealer or to an exempt investment adviser, or to the representative of an exempt dealer or exempt investment adviser, but- (a) subject to section 61, nothing in this subsection exempts an exempt dealer who carries on a business as an investment adviser from being registered as such under this Part; and (b) subject to section 60, nothing in this subsection exempts an exempt investment adviser who carries on a business of dealing in securities from being registered as a dealer.

(2) Where a person would, but for this subsection, be liable to a penalty for not being registered as a dealer, dealer's representative, investment adviser, or investment representative, he shall not be so liable- (a) until the expiry of a period of 3 months immediately following the commencement of this Part; or (b) where, before the expiry of that period, he applies for registration, until- (i) he is registered; or (ii) his application is refused.

48. Registration as a dealer (1) A person (whether an individual or a body corporate, or a member of a partnership or director of a body corporate) shall not carry on a business in Hong Kong of dealing in securities, or hold himself out as carrying on such a business, unless he is registered as a dealer under this Part.

(1A) A corporation shall not carry on a business in Hong Kong of dealing in securities, or hold itself out as carrying on such a business, unless at least one of the directors of the corporation, or, in the case of a corporation having only one director, that director, actively participates in, or is directly responsible for the supervision of, the corporation's business of dealing in securities and is registered as a dealer under this Part. (Added 62 of 1976 s. 9) (2) Any person who knowingly acts in contravention of subsection (1) or (1A) shall be guilty of an offence and shall be liable on conviction to a fine of $50,000 and, in the case of a continuing offence, to a further fine of $ 500 for each day during which the offence continues. (Amended 62 of 1976 s. 9) 49. Registration as an investment adviser (1) A person (whether an individual or a body corporate, or a member of a partnership or director of a body corporate) shall not in Hong Kong act as an investment adviser or hold himself out to be an investment adviser unless he is registered as an investment adviser under this Part.

(1A) A corporation shall not in Hong Kong act as an investment adviser, or hold itself out to be an investment adviser, unless at least one of the directors of the corporation, or, in the case of a corporation having only one director, that director, actively participates in, or is directly responsible for the supervision of, the corporation's business as an investment adviser and is registered as an investment adviser under this Part. (Added 62 of 1976 s. 10) (2) Any person who knowingly acts in contravention of subsection (1) or (1A) shall be guilty of an offence and shall be liable on conviction to a fine of $ 20,000 and, in the case of a continuing offence, to a further fine of $ 200 for each day during which the offence continues. (Amended 62 of 1976 s. 10) 49A. Registration as a dealing partnership (1) No registered dealer shall- (a) be or remain a member of a partnership carrying on a business in Hong Kong of dealing in securities, or hold itself out as carrying on such business, unless the partnership is registered as a dealing partnership under this Part; or (b) being a partner in a dealing partnership which is registered under this Part, carry on a business in Hong Kong of dealing in securities, or hold himself out as carrying on such business, otherwise than as a member of such partnership.

(2) Any person who knowingly acts in contravention of subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $ 50,000 and, in the case of a continuing offence, to further fine of $ 500 for each day during which the offence continues.

(Added 58 of 1985 s. 5) 49B. Registration as an investment advisers' partnership (1) No registered investment adviser shall- (a) be or remain a member of a partnership which acts in Hong Kong as an investment adviser, or hold himself out as so acting, unless the partnership is registered as an investment advisers' partnership under this Part; or (b) being a partner in an investment advisers' partnership which is registered under this Part, act in Hong Kong as an investment adviser or hold himself out as so acting, otherwise than as a member of such a partnership.

(2) Any person who knowingly acts in contravention of subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $ 20,000 and, in the case of a continuing offence, to a further fine of $ 200 for each day during which the offence continues.

(Added 58 of 1985 s. 5) 49C. Dealing directors only to deal on behalf of registered dealing corporations (1) No dealing director of a corporation which is a registered dealer shall carry on in Hong Kong a business of dealing in securities except a business carried on for and on behalf of- (a) that corporation; (b) a registered dealing partnership, in which that corporation is a partner; or (c) another corporation of which he is a dealing director and which is also a registered dealer.

(2) Any person who knowingly acts in contravention of subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 500 for each day during which the offence continues.

(Added 58 of 1985 s. 5) 49D. Supervisory directors of corporations which are registered investment advisers only to carry on the business of an investment adviser for such corporations (1) No director of a corporation which is a registered investment adviser and who- (a) actively participates in, or is directly responsible for the supervision of, the corporation's business as an investment adviser; and (b) is registered as an investment adviser, shall carry on in Hong Kong business as an investment adviser except on behalf of- (i) that corporation; (ii) a registered investment advisers' partnership in which that corporation is a partner; or (iii) another corporation which is a registered investment adviser and of which he is a director, being a director who actively participates in, or is directly responsible for the supervision of, that other corporation's business as an investment adviser.

(2) Any person who knowingly acts in contravention of subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of $ 20,000 and, in the case of a continuing offence, to a further fine of $ 200 for each day during which the offence continues. (Added 58 of 1985 s. 5) 50. Registration as a representative (1) No person shall- (a) act as a dealer's representative in Hong Kong unless he is registered as such under this Part; or (b) act as an investment representative in Hong Kong unless he is registered as such under this Part.

(1A) No registered dealer or registered investment adviser and no corporation or partnership may be registered as a dealer's representative or an investment representative under this Part. (Added 58 of 1985 s. 6) (1B) A dealer's representative or investment representative shall be registered as the representative of a registered dealer or, as the case may be, registered investment adviser specified in the register.

(Added 58 of 1985 s. 6) (1C) A dealer's representative or investment representative shall not act as a dealer's representative or, as the case may be, investment representative on behalf of any person other than the person specified in the register in accordance with subsection (1B). (Added 58 of 1985 s. 6) (2) Any person who knowingly acts in contravention of subsection (1) or (1C) shall be guilty of an offence and shall be liable on conviction to a fine of $ 10,000 and, in the case of a continuing offence, to a further fine of $ 100 for each day during which the offence continues. (Amended 58 of 1985 s. 6) 50A. Partnerships which may be registered as dealing partnerships or investment advisers' partnerships (1) No partnership may be registered or continue to be registered as a dealing partnership unless it is- (a) a general partnership and all the partners are registered dealers; or (b) a limited partnership and all the general partners are registered dealers.

(2) No partnership may be registered or continue to be registered as an investment advisers' partnership unless it is- (a) a general partnership and all the partners are registered investment advisers; or (b) a limited partnership and all the general partners are registered investment advisers. (Added 58 of 1985 s. 7) 51. Grant of certificates of registration (1) Subject to any provision to the contrary in this Part or Part VIA and to subsection (5), the Commission shall, on application by any person in the prescribed manner and on payment of the prescribed fee, issue to that person- (Amended 62 of 1976 s. 11; 58 of 1985 s. 8; L. N.

294 of 1988; 10 of 1989 s. 65) (a) a certificate of registration authorizing him to carry on business as a dealer in securities; (b) a certificate of registration authorizing him to deal in securities as a representative of a registered dealer; (c) a certificate of registration authorizing him to carry on business as an investment adviser; or (d) a certificate of registration authorizing him to act as a representative of a registered investment adviser.

(1A) Subject to sections 50A and 53 and to subsection (5), the Commission shall, on application by any partnership in the prescribed manner and on payment of the prescribed fee, issue to the partnership a certificate of registration- (Amended 10 of 1989 s. 65) (a) authorizing the partnership to carry on the business of dealing in securities; or (b) authorizing the partnership to carry on business as an investment adviser. (Added 58 of 1985 s. 8) (2) A certificate of registration shall be subject to such reasonable conditions as the Commission considers necessary. (Replaced 10 of 1989 s. 65) (3) A certificate of registration issued to a dealer or investment adviser shall specify the name of the person thereby authorized to carry on a business of dealing in securities or as an investment adviser, as the case may be.

(4) The issue of a certificate of registration to a person shall not authorize such a person to carry on that business under any name other than that specified in the certificate.

(5) This section shall be construed and have effect subject to sections 23, 25 and 27 (1) (b) of the Securities and Futures Commission Ordinance (Cap. 24). (Added 10 of 1989 s. 65) 51A. (Repealed 58 of 1989 s. 9) 52. Deposit required before registration as a dealer (1) Subject to subsection (6), the Commission shall not register an applicant as a dealer unless the applicant has deposited with the Commission such amount as is prescribed in regulations.

(1A) Subject to subsection (6), where an applicant is a corporation the Commission shall not register the corporation as a dealer unless there has been deposited with the Commission in respect of each director of the Corporation who actively participates in, or is in any way directly responsible for, the corporation's business of dealing in securities in Hong Kong such amount as is prescribed in regulations.

(Added 62 of 1976 s. 13) (2) If- (a) the dealer, being an individual person or member of a partnership of dealers, becomes bankrupt, the Commission shall pay the deposit to the dealer's trustee in bankruptcy; (b) the dealer, being a corporation, is ordered to be would up by or under the supervision of the Court, the Commission shall pay the deposit to the liquidator of the corporation; or (c) the certificate of registration of the dealer is revoked, or the dealer or any servant of the dealer, or where the dealer is a partnership or a corporation any member of the partnership or director or officer of the corporation, is convicted of an offence necessarily involving a finding that he or it was guilty of a breach of trust, defalcation, fraud or misfeasance in respect of any money or securities of a person who is a client of the dealer, the Commission may direct that all or any part of the deposit be forfeited.

(3) In the event of the deposit or any part of the deposit being paid to the dealer's trustee in bankruptcy or liquidator under subsection (2) (a) or (b), the amount paid shall be applied by the trustee or liquidator, as the case may be, in accordance with regulations made under this Ordinance for the purposes of this subsection.

(4) In the event of the deposit or any part of the deposit being forfeited under subsection (2) (c), the amount forfeited shall be applied by the Commission subject to and in accordance with regulations made under this Ordinance for the purposes of this subsection.

(5) Except as provided in this section or under regulations made under this Ordinance, no person may withdraw or transfer any deposit made under this section. (Amended 62 of 1976 s. 13) (6) The following persons are exempt from being required to deposit the amount required under this section- (a) a member of the Exchange Company; (b) a dealing director of a corporation which is a member of the Exchange Company unless he is also a dealing director of another corporation which is a registered dealer and which is not a member of the Exchange Company; (c) a corporation which is not a member of the Exchange Company, each of whose dealing directors has deposited the amount so required; and (d) any other dealer who belongs to a class of dealers exempted from the provisions of this section by regulations. (Replaced 58 of 1985 s.

48) (7) The Commission shall open one or more accounts at a licensed bank into which he shall pay all sums received from dealers by way of deposit under this section, and shall then ascertain what proportion of those sums ought, in his opinion, to be retained in the accounts to enable liabilities under subsection (2), or such other liabilities as may be prescribed by regulations, to be satisfied.

(8) After ascertaining the amount required to be retained under subsection (7), the Commission shall cause the balance of the sums to be invested in such manner as it thinks fit.

(8A) Any document relating to the investment of money under subsection (8) may be kept in the office of the Commission or deposited by it for safe keeping with a licensed bank. (Added 62 of 1976 s. 13) (9) Where the Commission has invested the balance of the sums under subsection (8), it shall, as soon as practicable after the end of each financial year, by notice in the Gazette, - (a) declare a rate of interest to be paid for that financial year in respect of each sum deposited under this section; (Amended 62 of 1976 s.

13) (b) specify the manner and time of payment of that interest; and (c) specify an amount to be charged for management expenses incurred by the Commission in administering that sum under this section.

(10) As soon as practicable after the publication of the notice referred to in subsection (9), the Commission shall, after deducting the appropriate amount chargeable in respect of management expenses, pay to each person who has deposited the prescribed sum under this section, or to that person's duly authorized agent or personal representative, the appropriate amount of interest due in respect of that sum for the financial year in question. (Amended 62 of 1976 s. 13) (11) If any person who has made a deposit under this section ceases to be registered as a dealer and the deposit has not been or is not required to be disposed of under subsection (2), that person, or his agent or personal representative, may apply to the Commission for the deposit to be released to him. (Amended 62 of 1976 s. 13) (12) On making an application under subsection (11), the applicant shall- (a) satisfy the Commission by a statutory declaration- (i) that he knows of no other person who has made or is entitled to make a claim in respect of the deposit; (ii) if he is not the dealer who made the deposit, that he is entitled to give a good discharge for the deposit and stating the circumstances in which he is so entitled; and (b) provide the Commission with such information as will satisfy him that an advertisement in a form approved by him has been inserted once in an English language newspaper, and once in a Chinese language newspaper, circulating in Hong Kong.

(13) The Commission, on being so satisfied, shall cause the amount of the deposit to be released to the applicant.

(Amended 10 of 1989 s. 65) 52A. Accounts of sums deposited under section 52 (1) The Commission shall keep proper accounts of all sums deposited under section 52, 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 who shall audit the accounts kept under subsection (1) 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.

(3) (Repealed 10 of 1989 s. 65) (Added 62 of 1976 s. 14. Amended 10 of 1989 s. 65) 53. Refusal of registration (1) The Commission may refuse to register an applicant for registration under this Part- (a) in the case of an applicant who is an individual, on the grounds that- (i) the applicant has not provided the Commission with such information relating to him or any person employed by or associated with him, and to any circumstances likely to affect his method of conducting business, as may be prescribed by or under this Ordinance; (ii) the applicant is detained under the Mental Health Ordinance (Cap.

136) in a mental hospital or is a person suffering or appearing to suffer from mental disorder within the meaning of that Ordinance; (Amended 46 of 1988 s. 33) (iii) the applicant is an undischarged bankrupt or has committed such an act of bankruptcy as is described in section 3 (1) of the Bankruptcy Ordinance (Cap. 6) or has entered into any compromise or scheme of arrangement with his creditors; (Amended 58 of 1985 s. 10) (iv) the applicant does not have the financial resources, in respect of the business for which he applies for registration, specified in any rules made under section 28 of the Securities and Futures Commission Ordinance (Cap. 24) which are then in force and which would be applicable to him if his application for registration were granted; or (Replaced 10 of 1989 s. 65) (v) the applicant has not for the purposes of section 27 of the Securities and Futures Commission Ordinance (Cap. 24) notified the location of business premises at which every record or other document relating to the business in respect of which he applies to be registered is to be kept, such location not being, in the opinion of the Commission, unsuitable having regard to the purposes of section 30 of that Ordinance; or (Replaced 10 of 1989 s. 65) (vi) the applicant is under 21 years of age; or (Replaced 10 of 1989 s. 65) (b) in the case of an applicant that is a corporation, on the grounds that- (i) the applicant has not provided the Commission with such information relating to it or any person employed by or associated with it, and to any circumstances likely to affect its method of conducting business as may be prescribed by or under this Ordinance; (ii) any director of the applicant is detained under the Mental Health Ordinance (Cap. 136) in a mental hospital or is a patient as defined in section 2 of that Ordinance; (iii) any director of the applicant is an undischarged bankrupt or has committed such an act of bankruptcy as is described in section 3 (1) of the Bankruptcy Ordinance (Cap. 6) or has entered into any compromise or scheme of arrangement with his creditors; (Amended 58 of 1985 s. 10) (iiia) where the application is for registration as a dealer, no director of the applicant is, or is in the opinion of the Commission likely to be, registered as a dealer, or where the application is for registration as an investment adviser, no director of the applicant is, or is in the opinion of the Commission likely to be, registered as an investment adviser; (Added 62 of 1976 s. 15) (iv) the applicant does not have the financial resources, in respect of the business for which he applies for registration, specified in any rules made under section 28 of the Securities and Futures Commission Ordinance (Cap. 24) which are then in force and which would be applicable to him if his application for registration were granted; or (Replaced 10 of 1989 s. 65) (v) the applicant has not for the purposes of section 27 of the Securities and Futures Commission Ordinance (Cap. 24) notified the location of business premises at which every record or other document relating to the business in respect of which he applies to be registered is to be kept, such location not being, in the opinion of the Commission , unsuitable having regard to the purposes of section 30 of that Ordinance; or (Replaced 10 of 1989 s. 65) (c) in the case of an applicant that is a partnership, on the grounds that- (i) any of the grounds specified in paragraph (a) or (b) exist in relation to any partner of that partnership, every partner being regarded as a separate applicant for the purposes of those paragraphs; or (ii) the applicant does not have the financial resources, in respect of the business for which it applies for registration, specified in any rules made under section 28 of the Securities and Futures Commission Ordinance (Cap. 24) which are then in force and which would be applicable to it if its application for registration were granted; or (iii) the applicant has not for the purposes of section 27 of the Securities and Futures Commission Ordinance (Cap. 24) notified the location of business premises at which every record or other document relating to the business in respect of which it applies to be registered is to be kept, such location not being, in the opinion of the Commission, unsuitable having regard to the purposes of section 30 of that Ordinance. (Replaced 10 of 1989 s. 65) (2) The Commission shall not refuse an application for registration without first giving the applicant an opportunity of being heard.

(3) Where the Commission refuses an application for registration, it shall notify the applicant in writing of that fact and shall include in the notice a statement of the reasons for the refusal. (Amended 10 of 1989 s. 65) 53A. Amendment of conditions of certificate of registration Without affecting the generality of section 51 (2), the Commission may at any time, by a notice in writing served on the holder of a certificate of registration, attach to the certificate such reasonable conditions as the Commission considers necessary or, if it considers it necessary, amend or cancel any condition to which the certificate is then subject, (Added 10 of 1989 s. 65) 54. (Repealed 10 of 1989 s. 65) 54A. Deemed registration of certain partnerships (1) Where- (a) in any registered dealing partnership or registered investment advisers' partnership- (i) any partner by agreement ceases to be a partner or a further partner is admitted to the partnership; (ii) the registration of any partner, being a registered dealer of registered investment adviser, is revoked under section 55 or 56; or (iii) any partner dies, is expelled, becomes bankrupt or, being a corporation goes into liquidation or is ordered to be would up; or (b) any registered dealing partnership or registered investment advisers' partnership is dissolved by order of court, and any former or remaining partners or, where a further partner is admitted to the partnership, the former partners and the new partner, desire to continue in partnership the business of dealing in securities or, as the case may be, carrying on the business of an investment adviser, they may notify the Commission in writing of this intention.

(2) Where notice is given under subsection (1), any new partnership formed for the purpose of continuing in partnership the business of dealing in securities or, as the case may be, the business of an investment adviser of a previous partnership, and any continuing partnership, shall be deemed to be a registered dealing partnership or registered investment advisers' partnership, as the case may be, until and unless the Commission in writing otherwise directs and, until and unless such partners give such notification, such partnership shall not be deemed to be so registered.

(3) The direction of the Commission under subsection (2) may permit the new or continuing partnership to carry on business subject to such conditions, being conditions reasonable in the circumstances as the Commission may think fit to impose and, without derogation from the generality of the fore-going, such conditions may require the continuing or new partnership to apply for registration under this Part, or to again apply for such registration, within such time as may be specified, failing which it shall no longer be deemed to be registered under this Part, and further provide that such partnership shall no longer be deemed to be so registered, should such application be unsuccessful.

(4) Any notice by a partnership under subsection (1) shall, if it gives particulars of any facts required to be notified under section 63, be deemed sufficient notice for the purposes of that section. (Added 58 of 1985 s. 12. Amended 10 of 1989 s. 65) 55. Revocation and suspension of certificates of registration in certain cases (1) Where any registered person- (a) being an individual, dies; or (b) being a corporation or, subject to section 54A, a partnership, is dissolved, (Replaced 58 of 1985 s. 13) the registration of that person is deemed to be revoked.

(2) The Commission may revoke the registration of a registered person or, if it thinks it appropriate to do so, suspend the registration of such a person for such time, or until the happening of such event, as it may determine- (a) in the case of a registered person who is an individual, if that person- (i) suffers or appears to suffer from mental disorder within the meaning of the Mental Health Ordinance (Cap. 136); (Replaced 46 of 1988 s. 33) (ii) has committed such an act of bankruptcy as is described in section 3 (1) of the Bankruptcy Ordinance (Cap. 6) or has entered into any compromise or scheme of arrangement with his creditors; (Replaced 58 of 1985 s. 13) (iii) is convicted, whether in Hong Kong or elsewhere, of an offence the conviction for which necessarily involved a finding that he acted fraudulently or dishonestly; (iv) is convicted of an offence against this Ordinance; (v) does not carry on business in Hong Kong; or (Amended 26 of 1992 s.

2) (vi) is registered as a representative and the registration of the dealer or investment adviser, in relation to whom the certificate of registration of the representative was granted, is revoked or suspended; or (b) in the case of a registered person that is a corporation if- (i) the corporation goes into liquidation or is ordered to be wound up; (ii) a receiver or manager of the property of the corporation is appointed; (iii) the corporation does not carry on business; (Amended 26 of 1992 s. 2) (iv) a levy of execution in respect of the corporation has not been satisfied; (v) the corporation has entered into a compromise or scheme of arrangement with its creditors; (vi) any director of the corporation is convicted, whether in Hong Kong or elsewhere, of an offence the conviction for which necessarily involved a finding that he acted fraudulently or dishonestly; (vii) any director of the corporation is convicted of an offence against this Ordinance; (viii) a director, secretary, or other person concerned in the management of the corporation who is required to be registered under this Part is not so registered or the registration of such a director, secretary, or other person has been revoked or suspended.

(2A) The Commission may- (a) revoke the registration of a registered dealer or a registered dealing partnership; or (b) suspend the registration of a registered dealer or registered dealing partnership for such time, or until the happening of such event, as it may determine, if such dealer or partnership fails to comply with section 65B. (Added 58 of 1985 s. 49) (2B) The Commission shall not revoke the registration of a registered person under subsection (2) without first giving such person an opportunity of being heard. (Added 26 of 1992 s. 2) (3) The Commission may revoke a certificate of registration at the request of its holder.

(4) The Commission may at any time remove the suspension of the registration of a registered person if it appears to it desirable to do so.

(5) Every decision of the Commission revoking or suspending the registration of a registered person shall be notified to that person in writing and shall include a statement of the reasons on which it is based and take effect from the date on which it is notified to that person or such later date as is specified in the notice. (Replaced 62 of 1976 s. 16) (Amended 10 of 1989 s. 65) 56. Powers of Commission in relation to misconduct (1) The Commission may at any time make inquiry concerning any of the following matters- (a) whether a registered person, being an individual, corporation or partnership- (i) has provided the Commission, whether before or after becoming registered under this Ordinance or the Securities and Futures Commission Ordinance (Cap. 24), with such information relating to him, and to any circumstances likely to affect his method of conducting business, as may be required by or under either of those Ordinance; (ii) is or has been guilty of any misconduct in relation to the conduct of his business; or (iii) is a fit and proper person to be registered by reason of any other circumstances; or (b) whether, in the case of a registered person that is a corporation, any director, secretary or person concerned in the management of the corporation- (i) is or has been guilty of any misconduct; or (ii) is a fit and proper person to be a director, secretary or person concerned in the management of the corporation.

(2) After making such inquiry in respect of a registered person, or where such person is deemed to be guilty of misconduct for the purposes of this section under subsection (6), the Commission may if it thinks fit- (Amended 62 of 1990 s. 39) (a) revoke the registration of the person; (b) suspend the registration of the person for such time, or until the happening of such event, as it may determine; or (c) reprimand him or, in the case of a registered person that is a corporation, reprimand any director, secretary or person concerned in its management.

(3) The Commission shall not impose any penalty under subsection (2) without first giving the registered person and, it the case of a registered person that is a corporation, any director, secretary or person concerned in its management, an opportunity of being heard.

(4) Every decision of the Commission imposing a penalty under subsection (2) on a person shall be notified to that person in writing and shall include a statement of the reasons on which it is based.

(5) For the purposes of this section "misconduct" means- (a) any failure to comply with any requirement of or imposed by or under this Ordinance or the Securities and Futures Commission Ordinance (Cap. 24) with respect to dealers, investment advisers or representatives; (b) any failure to observe the terms and conditions of a certificate of registration; (c) any actor omission relating to the conduct of business of a dealer, investment adviser or representative which is or is likely to be prejudicial to the interests of members of the investing public.

(6) Where a person has been identified as an insider dealer, in a written report of the Insider Dealing Tribunal prepared under section 22 (1) of the Securities (Insider Dealing) Ordinance (Cap. 395) such person shall be deemed to be guilty of misconduct for the purposes of this section. (Added 62 of 1990 s. 39) (Replaced 10 of 1989 s. 65) 57. Effect of revoking or suspending registration (1) (Repealed 10 of 1989 s. 65) (2) A revocation or suspension under this Part does not operate so as to- (a) avoid or affect any agreement transaction or arrangement relating to a dealing in securities entered into by a person whose registration has been suspended or revoked, whether the agreement, transaction, or arrangement was entered into before or after the suspension or revocation of the registration; or (b) affect any right, obligation, or liability arising under any such agreement, transaction, or arrangement.

(3) A person whose registration is revoked under section 55 (other than under subsection (2) (a) (v) or (vi) or (b) (iii) or 56 may not apply to be registered under this Part, whether as a dealer, investment adviser, or representative, until the expiration of at least 12 months from the revocation. (Amended 58 of 1985 s. 15) (4) Where the Commission revokes or suspends the registration of any person under section 55 or 56 or imposes any other penalty under section 56, it shall notify that person in writing of the revocation, suspension, or other penalty, and shall include in the notice a statement of the reasons as to why the registration of the person was revoked or suspended or, as the case may be, the penalty was imposed.

(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.

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)