监管新闻 (2015年12月)
/在： 监管新闻 /通过： Tony ChanNewsletter – November 2015
/在： 合规通讯 /通过： Tony Chan- Process Review Panel Report 2014-2015 on SFC
- SFC reprimands and fines Okasan International (Asia) Limited HK$4 million
- Market Misconduct Tribunal dismisses application by Andrew Left of Citron Research
- SFC obtains court order to freeze HK$23.5 million assets of Maxim Capital Limited
- Licence applicant convicted of providing false information to SFC
- SFC moves to paperless individual licences
- SFC bans Gong Yueyue for 15 years
- SFC proposes changes to the ATS Guidelines
1. Process Review Panel Report 2014-2015 on SFC
On 30 October 2015, the SFC published the annual report by the Process Review Panel (“PRP”) for the SFC.
Background
The PRP for the SFC is an independent panel established by the Chief Executive in November 2000. It is tasked to conduct reviews of operational procedures of the SFC and to determine whether the SFC has followed its internal procedures and operational guidelines to ensure consistency and fairness.
The PRP conducted a comprehensive review of 58 cases in 2014-2015 covering various divisions of the SFC. The SFC takes note of the observations and recommendations of the PRP, such as (1) issuing more guidelines to the industry through FAQ and to publicize its principles and criteria in handling individual applications concerning outside directorship, and (2) providing more detailed guidelines and training to the SFC staff to equip them with necessary knowledge on refusing non-compliant applications in SFC licensing in a timely manner, etc. The SFC looks forward to working with the PRP in the coming year.
For the full report, please refer to:
http://www.fstb.gov.hk/fsb/topical/doc/prereport14_e.pdf
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR105
2. SFC reprimands and fines Okasan International (Asia) Limited HK$4 million
On 2 November 2015, the SFC has reprimanded and fined Okasan International (Asia) Limited (“Okasan”) HK$4 million for failures in selling unlisted investment products and making proper disclosure of trading profits.
Background
An SFC investigation into Okasan’s practices and procedures in distributing unlisted investment products to its clients between January and September 2013 found that Okasan:
- did not ensure adequate product due diligence had been conducted on the products before recommending them to clients;
- did not ensure that recommendations and/or solicitations made to its clients in relation to the products were suitable for and reasonable in all the circumstances of the clients;
- did not maintain adequate documentary records of the investment advice or recommendations given to its clients nor provide clients with a copy of the written advice; and
- failed to make adequate disclosure to clients of the trading profits it made from back-to-back transactions
In determining the penalty, the SFC took into account that Okasan:
- co-operated in resolving the disciplinary proceedings;
- has agreed to conduct an independent review of its systems and controls in respect of its distribution of unlisted investment products and to enhance its complaint handling procedures; and
- has an otherwise clean disciplinary record in relation to its regulated activities.
Comment
Readers should note that under paragraph 8.3 of the Code of Conduct, where a licensed person enters into a back-to-back transaction concerning an investment product, the licensed person should disclose to the client the trading profit to be made as a percentage ceiling of the investment amount or the dollar equivalent. Licensed corporations should regularly review its trading and disclosure process to ensure compliance.
For a copy of the statement of disciplinary action, please refer to:
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR104
3. Market Misconduct Tribunal dismisses application by Andrew Left of Citron Research
On 2 November 2015, the Market Misconduct Tribunal (“MMT”) has dismissed an application by Mr Andrew Left (“Left”) of Citron Research for an order for the production of documents relating to the financial position of Evergrande Real Estate Group Limited (“Evergrande”), or for a stay of the MMT proceedings commenced by the SFC in relation to a research report on Evergrande published in 2012. The MMT also ordered Left to pay the SFC’s cost in relation to this application
Background
The SFC commenced proceedings in the MMT in December 2014 against Left alleging that a report he published on 21 June 2012 on Citron Research’s website contained false or misleading information about Evergrande. The report stated, among other things, that Evergrande was insolvent and had consistently presented fraudulent information to the investing public.
Left argued that to determine whether the report contained false or misleading information, the MMT had to enquire into Evergrande’s financial position which required a review of its records and documents. Left made an application to the MMT on 17 September 2015 for an order for production of documents, or for a stay of proceedings.
In dismissing the application, Chairman of the MMT, the Honourable Mr Justice Hartmann, agreed with the SFC’s view that at the time when Left compiled the report, the only information available to him was information in the public domain.
The Chairman noted that the SFC is therefore obliged to present its case on the basis of that information just as Left is obliged to do so.
Comment
Pursuant to Section 277 of the Securities and Futures Ordinance (“SFO”), a person shall be regarded as having engaged in market misconduct if he discloses, circulates or disseminates false or misleading information as to a material fact which is likely to induce another person to deal in securities in Hong Kong, knowing that, or is reckless or negligent as to whether, the information is false or misleading as to a material fact, or is false or misleading through the omission of a material fact. By publishing false and misleading information in the public domain, Left is alleged to have committed market misconduct within the meaning of Section 277 of SFO.
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR106
4. SFC obtains court order to freeze HK$23.5 million assets of Maxim Capital Limited
On 10 November 2015, the Court of First Instance has granted various interim orders against Maxim Capital Limited (“Maxim Capital”), an unlicensed investment firm, including freezing all its monies in Hong Kong totalling approximately HK$23.5 million following legal proceedings brought by the SFC under section 213 of the SFO.
Interim orders were also granted on 6 November 2015 to restrain Maxim Capital from holding out as carrying on regulated activities whilst unlicensed and to suspend its websites that have been promoting the carrying out of regulated activities under the brand name “Maxim Trader”.
Background
The SFC’s investigation found that Maxim Capital and Maxim Trader have solicited over 130 investors to invest more than HK$111 million in a number of investment schemes since 2013 that claimed to pay monthly returns from 3% to 8%.
Whilst the investors were initially able to receive monthly returns on their investments, they have not received further monthly returns since July 2015 and were informed by Maxim Capital/Maxim Trader that their investments had been converted into shares of a company which appear to the SFC to be worthless.
The SFC alleges that Maxim Capital and Maxim Trader have contravened the SFO by holding out as carrying on a business in SFC regulated activities in Hong Kong without an SFC licence and issuing related advertisements.
The SFC also alleges that Maxim Capital and Maxim Trader have contravened the SFO by issuing advertisements which invite the public to enter into agreements to acquire interests in a collective investment scheme without SFC’s authorization. Maxim Capital and Maxim Trader made various fraudulent or reckless misrepresentations, including the claim that Maxim Capital was a financial service provider licensed in New Zealand and regulated in Belize.
On 27 October 2015, the SFC commenced proceedings under section 213 of the SFO seeking various final orders against Maxim Capital and Maxim Trader, including injunctive relief and restitutionary orders requiring them to restore the affected investors to their pre-transaction positions. Pending the substantive determination of the SFC’s claims, the SFC also applied on the same day for various interlocutory injunction orders.
The SFC has identified approximately HK$23.5 million held in an account maintained by Maxim Capital with a licensed money service operator in Hong Kong. Those funds are now frozen under the terms of the interim injunction order. This order will remain in force until the trial of these proceedings, the date of which has yet to be fixed.
The SFC’s investigation is continuing.
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR108
5. Licence applicant convicted of providing false information to SFC
On 12 November 2015, the Eastern Magistracy convicted Mr Lee Kwok Wah (“Lee”) of making false or misleading representations in his two licence applications to the SFC.
Background
Lee was fined HK$15,000 and also ordered to pay the SFC’s investigation costs.
The SFC found that, in April and September 2014, Lee concealed from the SFC his previous criminal convictions in two licence applications.
The SFC expects applicants to make full and accurate disclosure of all information required to be submitted with a licence application. Failure of applicants to do so might affect their fitness and properness to be licensed.
Comment
Pursuant to section 383 of the SFO, applicants are required to disclose all prior criminal convictions, disciplinary sanctions in relation to any trade, business or profession and whether they have been investigated by a local or foreign regulatory or criminal investigatory body. Lee’s failure to make full and accurate disclosure of all information required in a licence application might affect his fitness and properness to be licenced. Applicants need to be cautious in providing information in their licence applications to the SFC to ensure the information is accurate and not misleading.
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR111
6. SFC moves to paperless individual licences
On 13 November 2015, the SFC announces that it will no longer issue printed licences to individual licensees with effect on that day, when the Securities and Futures (Amendment) Ordinance 2015 came into operation.
Background
Previously, new printed licences were issued whenever there was any change in an individual’s licensing particulars, such as a change in principal, type of regulated activity or licensing conditions. The move to paperless individual licenses will reduce the industry’s compliance burden and help protect the environment.
Investors are encouraged to check the register when considering using the services of licensed individuals and intermediaries.
In addition, investors can find information on choosing and dealing with licensed individuals and intermediaries on the website of the Investor Education Centre:
For details of licenced individuals, please refer to the SFC’s online Public Register of Licensed Persons and Registered Institutions :
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR110
7. SFC bans Gong Yueyue for 15 years
On 16 November 2015, the SFC has banned Mr Gong Yueyue (“Gong”), a former licensed representative, from re-entering the industry for 15 years following his conviction by the Eastern Magistrates’ Court on 25 February 2015 for an offence of bribery.
Background
The Court found that, in March 2014, Gong accepted HK$100,000 for the publication of a research report on a listed company. The target share price proposed by the research report was not an independent and fair assessment of the listed company.
In late 2013, a third party asked Gong to prepare a research report on the listed company. Draft reports were prepared by Gong and after they were shown to the management of the listed company, the third party indicated to Gong that the target share price should be revised upwards. On the day the research report with the revised target share price was published, Gong received HK$100,000 from the third party. Gong was sentenced to imprisonment of one year.
Comment
Section 9(1) (a) of the Prevention of Bribery Ordinance (Cap.201) (“PBO”) provides that any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business, shall be guilty of an offence.
In this case, by accepting a bribe of HK$100,000 for publishing a research report on a listed company in which the information of the report was not based on an independent and fair assessment, Gong is found guilty in contrary to Section 9(1)(a) of PBO.
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR112
8. SFC proposes changes to the ATS Guidelines
On 20 November 2015, SFC released a consultation paper on proposed changes to update the Guidelines for the Regulation of Automated Trading Services.
Background
The proposals reflect regulatory and market developments and mainly cover the implementation of the regulation of over-the-counter (“OTC”) derivative transactions, setting out more specific requirements for central counterparties that wish to provide clearing services for OTC derivative transactions. They also align the guidelines with international standards and practices and codify existing practices.
“The proposed amendments are necessary to keep pace with market developments,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “They will also help prepare for the implementation of mandatory clearing, which is part of the new OTC derivatives regime.”
Following the consultation, the SFC plans to implement the revised ATS Guidelines at the same time as the implementation of the subsidiary legislation for mandatory clearing obligation for OTC derivatives transactions, which is expected to be in mid-2016.
The public is invited to submit their comments to the SFC by 31 December 2015. Written comments may be sent online via SFC website (https://www.sfc.hk/edistributionWeb/gateway/EN/consultation/comment?refNo=15CP5),
by email to [email protected], by post or by fax to +852 2521 7917.
For details of consultation paper, please refer to:
https://www.sfc.hk/edistributionWeb/gateway/EN/consultation/comment?refNo=15CP5
For further details, please refer to:
http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=15PR113
The article is for general information purpose only and is not intended to constitute legal or other professional advice.
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