86 Financial and Monetary Affairs
representatives, and 109 registered institutions, such as banks, engaging in regulated activities such as dealing and advising on securities and futures.
Market Misconduct
In 2010, the SFC continued to prosecute insider dealing and market manipulation in the criminal courts. Two individuals were prosecuted for market manipulation in derivative warrants under the SFO and were sentenced to 33 and 36 months imprisonment by the District Court in the first indictable prosecution for market manipulation in derivative warrants in Hong Kong. The individuals appealed to the Court of Appeal which dismissed the appeals but reduced the jail sentences to 20 and 21 months respectively. Actions were also brought against company directors who failed to perform their duties as directors. 2010 saw the first case of its kind in which the High Court disqualified company directors over failure in timely disclosure of information, and ordered a listed company to commence proceedings against its former directors. The SFC also continued to seek court orders to freeze suspected proceeds of market misconduct.
The Market Misconduct Tribunal (MMT), established in 2003, carries out civil proceedings and hears cases referred to it by the Financial Secretary following investigation by the SFC. So far, the MMT has concluded five cases, and 17 persons or companies were found to have engaged in market misconduct. They were ordered by the MMT to disgorge profits arising from the misconduct and to pay the costs of investigation and proceedings, and were disqualified from being company directors, where appropriate.
Recent Developments
The SFC also announced a package of investor protection measures, including a consolidated product handbook with revised codes on unit trusts and mutual funds. and on investment-linked assurance schemes as well as a new code on unlisted structured investment products. The codes became effective on June 25, 2010 and introduced a series of measures to enhance disclosure and product transparency, including product key facts statements and for unlisted structured investment products offered to the public a post-sale cooling-off period. As part of the package of investor protection measures, the SFC also strengthened requirements for intermediaries to enhance selling practices relating to the sale of investment products.
Investor protection and education continued to be the highlight following the global financial crisis. Further to the settlement agreement among SFC, HKMA and 16 distributing banks related to Lehman Brothers Minibonds as announced in July 2009, the SFC and HKMA reached an agreement in July 2010 with a bank in relation to the bank's distribution of the Lehman Brothers-related credit-linked notes. Under the agreement the bank offered to pay its customers classified as low to medium risk a sum equal to the amount of their investment in the notes plus. interest. Approximately 2 160 accounts of low to medium risk customers benefited, involving a total sum of approximately $651 million. In addition, the bank was required to review complaints of high risk customers who bought the notes and