ENG-2014 — Page 110

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Financial and Monetary Affairs

Tribunal. The SFC's procedures, actions and decisions are also subject to other checks and balances including the Process Review Panel for the SFC, the Ombudsman, and the courts.

Recent Developments

At the end of 2014, there were 39,621 licensed entities, including securities brokers, futures dealers, investment advisors and fund managers as well as their representatives, and 118 registered institutions, such as banks, engaging in regulated activities such as dealing in and advising on securities and futures.

Statistics on Licensing for SFC-regulated Activities (year-end)

Licensed entities

Of which:

Licensed corporations

Licensed individuals

2012

2013

2014

39,119

38,985

39,621

1,897

1,956

2,034

37,222

37,029

37,587

117

121

118

Registered institutions

In February, the SFC published a consultation paper on the regulation of alternative liquidity pools11 (ALPs) operating in Hong Kong, proposing a uniform set of requirements with which all ALP operators and licensed or registered persons who route orders to ALPs will be obliged to comply. The SFC further published supplemental consultation conclusions in August reaffirming that IPO sponsors are subject to existing statutory civil and criminal liability for defective prospectuses. In September, the SFC concluded a consultation on proposed amendments to the professional investor regime. Under this regime, intermediaries are not allowed to be exempt from various fundamental Code of Conduct12 requirements when serving individual professional investors; and intermediaries are to adopt principles-based criteria to assess whether exemptions to these fundamental requirements apply when they serve corporate professional investors.

On the enforcement front, the SFC disciplined licensees in 2014 involving 40 individuals and 12 corporations with fines totalling $66.47 million; separately, 17 individuals and two corporations were successfully prosecuted for various criminal offences, including unlicensed activities, insider dealing and market manipulation.

During the year, the SFC successfully obtained a number of compensation orders in favour of investors: a futures trader was ordered to pay compensation of over $13 million to around 500 investors as a result of his manipulation of the futures market; and the former chairman and a director of a listed company were ordered to compensate the company $420 million for breaching their directors' duties to the company. The SFC also obtained a freezing injunction order against the former chairman of another listed company up to a sum of $1.2 billion pending a compensation order in favour of more than 1,300 minority shareholders. Civil proceedings and Market Misconduct Tribunal proceedings were also commenced against a listed company and five of its former executive directors for disclosure of possible false or misleading information concerning the financial status of the company. The SFC also obtained

11 Also known as alternative trading systems or dark pools.

12

The Code of Conduct for Persons Licensed by or Registered with the SFC.

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