84 | Financial and Monetary Affairs
schemes, e.g. mutual funds; regulation of takeovers, mergers and other corporate activities; listing regulation under the dual filing system for IPO applicants and issuers; supervision of markets including the exchanges and clearing houses; enforcement of securities laws and rules; and investor education.
At end 2009, there were 35 935 licensed persons, including securities brokerage firms, futures dealers and securities margin financiers, as well as their representatives, and 107 registered institutions, such as banks, engaging in regulated activities like dealing and advising on securities and futures.
Market Misconduct
Market misconduct is subject to criminal prosecution or civil proceedings. The first conviction leading to jail sentences for insider dealing took place in 2009. Ten individuals were convicted of insider dealing in the indictable trials for this offence under the SFO, including a former managing director of a global bank who was jailed for seven years and fined $23 million, a record high imposed on an insider. The first indictable prosecution for market manipulation under the SFO also happened during the year. Separately, the SFC also maintained civil proceedings to secure the suspected proceeds of market misconduct. In one case the SFC secured interim orders freezing assets generated from a suspected fraud of up to HK$1.655 billion, the largest amount that the SFC had ever applied to the Court to freeze.
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. In 2009, the MMT concluded three cases, and nine persons or companies were found to have engaged in market misconduct. The MMT's predecessor, the Insider Dealing Tribunal (IDT), finalised its last two cases, bringing the number of cases concluded by the IDT to 27 and finding 65 persons culpable of insider dealing.
Recent Developments
Investor protection and education continued to be the highlight of the post- crisis year.
In April 2009, the SFC for the first time intervened in the privatisation proceedings commenced by a large telecommunications company in the interest of minority shareholders. Upon gathering evidence at the shareholders' meeting and studying circumstances surrounding share transfers of single board lots before the meeting, the SFC applied to the court to sanction the delisting scheme. The court ruled in favour of the SFC, saying that share splitting for the purpose of manipulating the outcome in a scheme of arrangement is a form of abuse.
The collapse of Lehman Brothers in September 2008 triggered complaints about sales of structured investment products by financial intermediaries to retail investors. To resolve the complaints efficiently and effectively, the SFC adopted a 'top-down' approach, examining, among other aspects, systemic problems with product marketing, including the selling practices and internal controls of intermediaries. In January 2009, a major local brokerage reached an agreement with the SFC to
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