XN000022-1991-12-04 — Page 10

WEDNESDAY, DECEMBER 4, 1991

"IN RETURN, AUDITORS SHOULD BE AFFORDED STATUTORY PROTECTION AGAINST ANY POSSIBLE LIABILITY THEY MAY INCUR IN RESPECT OF BREACH OF DUTY OF CONFIDENTIALITY TO CLIENTS WHEN COMMUNICATING IN GOOD FAITH TO THE SFC," THE SECRETARY SAID.

"SIMILAR PROTECTION IS ALREADY AVAILABLE UNDER THE BANKING ORDINACE, HE ADDED.

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GIVEN THAT A CHANGE OR PROSPECTIVE CHANGE OF AN AUDITOR MAY SIGNIFY POSSIBLE IRREGULARITIES IN THE OPERATION OF A DEALER'S AFFAIRS WHICH COULD GIVE RISE TO PRUDENTIAL CONCERNS, MR NENDICK ALSO PROPOSED THAT DEALERS SHOULD BE REQUIRED TO NOTIFY THE SFC OF ANY SUCH CHANGE.

FOR SIMILAR REASONS, THE SFC OUGHT ALSO BE INFORMED BY AUDITORS OF THEIR INTENTION TO RESIGN OR TO QUALIFY ACCOUNTS, HE SAID.

MR NENDICK SAID THE PROPOSED AMENDMENTS TO THE SECURITIES AND FUTURES. COMMISSION ORDINANCE WOULD ALSO ENABLE SFC TO DISCLOSE INFORMATION RELATING TO AN AUDITOR TO THE HONG KONG SOCIETY OF ACCOUNTANTS FOR THE PURPOSE OF ANY DISCIPLINARY PROCEEDINGS.

IN MOVING THE SECOND READINGS OF THE OTHER TWO BILLS, MR. NENDICK SAID THE PURPOSE OF THESE BILLS WAS ALSO TO REVOKE THE LICENCES OF DEALERS WHO HAD NEVER TRADED.

AS REGARDS THE QUESTION OF REVOKING THE LICENCES OF DEALERS WHO HAD NEVER TRADED, HE SAID UNDER EXISTING PROVISIONS, THE 3FC COULD ROUTINELY SUSPEND OR REVOKE REGISTRATION ON GROUNDS OF CESSATION OF BUSINESS.

BUT BECAUSE OF THE WORDING OF THE EXISTING PROVISIONS, WHILE THE COMMISSION COULD REVOKE LICENCES OF DEALERS WHO HAD CEASED BUSINESS, IT WAS UNABLE TO REVOKE LICENCES OF DEALERS WHO HAD NEVER COMMENCED BUSINESS.

THE BILLS SOUGHT TO REDRESS THIS SHORTCOMING BY EXTENDING THE GROUNDS FOR REVOCATION TO COVER ANY INDIVIDUAL OR CORPORATION WHICH DID NOT CARRY ON THE BUSINESS FOR WHICH THEY WERE REGISTERED.

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"THIS WILL MAKE IT IMMATERIAL WHETHER THE PERSON CONCERNED HAS CEASED TO CARRY ON BUSINESS OR HAS NEVER STARTED, MR NENDICK SAID.

DEBATES ON THE BILLS WERE ADJOURNED.

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