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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 (Repealed) 14.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 (Repealed) PART III STOCK MARKETS 20.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 (Repealed) 26.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 (Repealed) PART IV 31-37. (Repealed) PART V 38-46. (Repealed) PART VI REGISTRATION OF DEALERS, INVESTMENT ADVISERS, AND REPRESENTATIVES, ETC.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 (Repealed) 52.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 (Repealed) 54A.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 (Repealed) 60.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.
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