FINANCIAL AND MONETARY AFFAIRS
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Insider Dealing Tribunal and the Market Misconduct Tribunal
The Insider Dealing Tribunal has been an important feature of the regulatory framework for the securities market in Hong Kong. Established under the Securities (Insider Dealing) Ordinance, the tribunal looks into cases involving suspected insider dealing referred to it by the Financial Secretary. Since the commencement of its operation in 1994, the tribunal has concluded 14 cases.
With the commencement of the SFO on April 1, 2003, the Insider Dealing Tribunal has been replaced by a Market Misconduct Tribunal (MMT), which covers five other types of market misconduct (namely false trading; price rigging; disclosure of information about prohibited transactions; disclosure of false or misleading information inducing transactions; and stock market manipulation) in addition to insider dealing. The MMT decides cases on the civil standard of proof and can impose a range of civil sanctions, such as ordering the disgorgement of profits, banning a person from trading in SFC regulated financial products and disqualifying a person from directorship or management of a company.
The MMT inquires into market misconduct which occurs on or after April 1, 2003. The Insider Dealing Tribunal continues in existence to inquire into cases of insider dealing that occurred before April 1, 2003.
As an alternative to civil proceedings, market misconduct is subject to criminal prosecution, which, if successful, may result in more severe penalties on conviction, including up to 10 years' imprisonment or a fine of up to $10 million.
Recent Developments
The Government, together with the SFC, strives to continue to provide a favourable environment for introducing new financial products, and for its intermediaries.
The SFC published in July 2003 a Code on Real Estate Investment Trusts (REITs) following market consultation. Market respondents welcomed the code which facilitates new product development. The SFC also concluded the review of Chapter 20 of the Listing Rules of HKEx for streamlining the listing of SFC-authorised collective investment schemes. The HKEx announced the amendments in August and the new Chapter 20 became effective on September 1, 2003.
The SFC consultation on the draft guidelines for regulating Exchange Traded Index Tracking Funds (ETFs) ended in May 2003. The new guidelines, which provide for streamlined requirements on investment restrictions and risk disclosure requirements, suitable disclosure of trading information and streamlined recognition of overseas ETFs, were gazetted and became effective in October 2003.
With the liberalisation of commission rates in April 2003, brokerage commissions are now freely negotiable between brokers and their clients. The Government convened a Working Group on the Business Environment of the Stockbroking Industry in a bid to enhance the competitiveness of small and medium sized brokerage firms. The Working Group engaged the industry actively and completed its deliberations in April 2003. It put forward a number of recommendations, including enhancing transparency of brokerage commissions and other service fees; promoting image building of brokers and market awareness among investors; and enhancing training opportunities for brokers. The SFC, the HKMA, the HKEx and various industry associations have been following up on these recommendations.
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