TNAG-1857-FCO40-2632-Legislative-Council-of-Hong-Kong-memoranda-and-minutes-of-me-1989 — Page 78

HONG KONG LEGISLATIVE COUNCIL

12 July 1989

香港立法局

·九八九年七月十二日

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He said: Sir, I move that the Securities (Insider Dealing) Bill 1989 be read the Second time.

The main purpose of this Bill is to provide a more comprehensive definition of insider dealing and to increase the sanctions that may be imposed by the Insider Dealing Tribunal in order to provide a more effective deterrent against insider dealing. The Bill incorporates many of the existing provisions in Part XIIA of the Securities Ordinance, particularly those in relation to the constitution of the tribunal, the scope of its inquiry and its powers of investigation. The Bill also introduces a number of important changes which are designed to improve and strengthen the present tribunal system. I shall highlight some of the more significant proposals.

First, the Bill increases substantially the sanctions which may be imposed by the Insider Dealing Tribunal. At present, the only sanction available is public censure. This is inadequate and more effective deterrents are required. To this end, the Bill empowers the tribunal to impose severe penalties upon persons found to have been involved in insider dealing. The tribunal may disqualify such persons from the directorship or the management of any company, public or private, for up to five years. The tribunal may also require the disgorgement of

any profit made or loss avoided and impose a fine of up to three times the relevant amount.

We believe that tougher sanctions coupled with the flexibility of the tribunal system is the right approach in tackling the problem of insider dealing in Hong Kong. However, as I have said previously, we have not ruled out the option of criminalization entirely. We shall review the matter in three years' time in the light of experience of increased tribunal sanctions under this Bill.

Secondly, the Bill provides a more comprehensive definition of insider dealing. It now catches as an insider a person who is contemplating or has contemplated a takeover bid as well as any person informed by an insider, commonly known as a "tippee". It also catches dealing in the securities of a related corporation and the promotion of insider dealing on an overseas stock exchange. Moreover, it adds an important new requirement that an insider or tippee must know that he is in possession of inside information.

Thirdly, the Bill grants a limited right of appeal. Persons found to have been involved in insider dealing may appeal on a point of law to the Court of Appeal. We have not proposed a general right of appeal because we believe the