8.
9.
Intervention
powers have already proved their usefulness in the U.K., including in the Barlow Clowes' case, where the Securities and Investment Board ordered the company to cease to carry on business and thereby prevented further losses being sustained by investors. This action would probably not have been possible before the passing of the Financial Services Act, since under the old law, it would have been necessary to prove that the company was insolvent before its trading could be stopped. That is often a matter of some difficulty, and it was far from clear that the SIB could have proved that Barlow Clowes was insolvent, and so succeed on a petition to wind up.
The Bill will also empower the Commission to petition for the winding up of a corporate registered person on the
in grounds laid down
the Companies Ordinance, namely that the company is unable to pay its debts or that it would be just and equitable to wind it up. There will also be a corresponding power for the Commission to petition for bankruptcy. If the registered person is a member of either Exchange, the Commission would be under a duty to notify the Exchange before presenting a winding up or bankruptcy petition.
Delegation
The Bill will contain a provision which would allow the Commission, with the approval of the Governor in Council, to delegate, in the future, its powers to make rules regulating the financial resources of registered persons who are members either of the Stock Exchange or the Futures Exchange, and to deal with applications for registration by any such persons.
Funding
the
The Securities Review Committee proposed that the Commission be funded largely by the market and partly by the
the Government. While the details are being worked out, it is proposed that the market share of the funding should be in the form of a levy on transactions on the two Exchanges and also by fees and charges
specific services rendered or functions performed on a broad cost
The level of
be determined by the levy would Governor-in-Council.
Subject to the approval of the Finance Committee, it is intended that the
the Government's contribution should be
form of a in the start-up grant, an interest free advance, an annual recurrent grant, and loans which would be made available only if the Commission's reserves fall below a specified level.
recovery
basis.
10.
Penalties
It is
During the consultation period, higher penalties than at present are chargeable under the Securities Ordinance, the Commodities Trading Ordinance and the other applicable Ordinances, were recommended by many bodies. therefore proposed that, for the more serious offences under the Bill which would be tried upon indictment, the maximum penalties would be a fine of $1 million and imprisonment for two years.
G.M. Lewis
Adviser on Securities Legislation
December 9, 1988