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SECURITIES ORDINANCE
SECURITIES ORDINANCE
(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)
ng 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.
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