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Enclosure 2.
Memorandum on Draft Bill to amend the Law in respect of Sales of Shares in limited Liability Companies.
This Bill which is based on Leeman's Act (30 Vict. Ch. 29) was introduced by the Honourable J. J. KESWICK in order to check and if possible to stop for the future the great gambling in Shares which took place last year in Hongkong and which led to great abuses and evils and to the ruin of many.
This gambling exists to a certain extent now and may be renewed at any moment. Two or three large operators and monied men having sold largely for delivery at future dates can no doubt in Hongkong rule the market; and by con- tinuing to sell they lower considerably the price of the Stock they are dealing in, thereby either ruining or causing heavy losses to those who have bought, and injuring the Stock by depreciating it without any good reason to the prejudice of bona fide Shareholders; and this is done by unscrupulous speculators who have no interest in the Stock.
If only the regular or what I would call professional gamblers or speculators were ruined, it would not be such a public matter as it has become, but a great many young men and others who have some money to risk are induced to buy shares for future dates on fair promises trusting that they will be fairly dealt with and afterwards find that they are exposed to acts which are not far removed from being criminal. There is no doubt that the evil is very great and that it should be stopped if possible-the recent cases of embezzlement by bank clerks and others which have been unravelled at the Criminal Sessions had no doubt their origin in excessive and rash speculations in shares.
The proposed law would not in any way interfere with legitimate business or speculation and would be welcomed by all except a few jobbers, speculators and brokers.
On the other hand it is urged against the Bill that it is a serious interference with the freedom of contract which should not be restricted unless public interests required it.
That there are no public interests involved, but only the relief and protection of private individuals who freely enter into these contracts. That no such law has been passed in England and no sufficient reason has been shown why such an exceptional measure should be introduced here, that even if the law was passed it would be evaded as the English Act has been set at nought there.
From what I have seen and learnt as Official Assignee, I can state that there is a very great amount of selling and buying shares which is not bonâ fide or legi- timate speculation but rash and extravagant gambling, and I should be glad to see a stop put to this. The argument that because the law does not exist in England it should not be enacted here cannot, I submit, be seriously maintained as the circumstances and extent of the local market differ so greatly from that of England and afford scope and opportunity for practices which it would perhaps be useless to attempt on a larger field.
At the same time I admit that the objection that it is a restriction on the freedom of contract is one which deserves consideration. It is in my opinion the only serious objection against this Bill.
EDW. J. ACKROYD,
Acting Attorney General.
25th August, 1890.
Telegram in reply to the above Despatch.
LONDON, 9th October, 1890.
Governor,
HONGKONG.
In reply to your despatch No. 317 of 2nd September if Un-Official Members of Council agree I have no objection.
KNUTSFORD.