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The licensing regime under the Securities and Futures Ordinance

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The licensing regime under the Securities and Futures Ordinance

16. DISCIPLINARY REGIME

Part IX SFO sets out the disciplinary powers of the SFC and the categories of persons subject to such powers. The SFO has considerably widened the range of sanctions available to the SFC and has increased the potential liability of the officers and those involved in management of licensed corporations and registered institutions. A further major change is the full application of the disciplinary regime to registered institutions.

  • 16.1 Liability of Officers

    Sections 194 and 196 set out a range of sanctions which the SFC may impose where a ‘regulated person’ is:

    1. guilty of misconduct; or
    2. considered by the SFC not to be a fit and proper person to be or to remain the same type of regulated person.

    The definition of a ‘regulated person’ is broad. In the case of licensed corporations, it includes the licensed corporation, its responsible officers (which include all executive directors) and any person involved in the management of the licensed corporation (Section 194(7)). In the case of a registered institution, ‘regulated persons’ include the registered institution, its executive officers, any person involved in the management of the business which constitutes a regulated activity for which the institution is registered and any person registered with the HKMA under Section 20 of the Banking Ordinance as a person who conducts a regulated activity on behalf of the registered institution.

    ‘Misconduct’ is defined as:

    1. a contravention of the provisions of the SFO or of any subsidiary legislation made under it;
    2. a contravention of any of the terms and conditions of any licence or registration under the SFO;
    3. a contravention of any condition imposed under the SFO or under certain provisions of the Banking Ordinance; or
    4. conduct of a regulated activity which in the opinion of the SFC is, or is likely to be, prejudicial to the interest of the investing public or to the public interest.

    Significantly, the definition of ‘misconduct’ further provides that where a licensed corporation or registered institution has committed misconduct as a result of conduct which occurred with the consent or connivance of, or which was attributable to any neglect on the part of, a responsible officer or a person involved in the management of the business of a licensed corporation, or an executive officer or a person involved in the management of any regulated activity of a registered institution, then the misconduct is also regarded as the misconduct of the relevant individual (Section 193(2)).

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  • 16.2 Sanctions Available
     
    The sanctions available to the SFC include a new power to impose on any regulated person a maximum fine of the greater of $10,000,000 or 3 times the amount of profit made or loss avoided by the regulated person as a result of the misconduct. Other sanctions include:

    1. the revocation or suspension of a licensed corporation’s licence or the registration of a registered institution in respect of all or part of the regulated activities for which it is licensed or registered;
    2. the revocation or suspension of a person’s approval as a responsible officer;
    3. a public or private reprimand; and
    4. a prohibition order preventing a licensed corporation or registered institution from applying to be licensed or registered or preventing an individual from applying for approval as a responsible officer of a licensed corporation or as an executive officer or relevant individual of a registered institution, in each case for a period specified by the SFC.

    The Banking Ordinance also contains provisions entitling the HKMA, after consulting the SFC, to withdraw or suspend the consent granted to an executive officer (Section 71C(4)) and to remove a relevant individual from the register (Section 58A(1)), in both cases either indefinitely or for a specified period. These powers arise where the relevant individual has been guilty of misconduct or if the HKMA is no longer satisfied as to their fitness and properness. The Banking Ordinance definition of ‘misconduct’ for these purposes includes the breach of any provisions of the SFO which apply to the executive officer or relevant individual, conduct which in the opinion of the SFC is, or is likely to be, prejudicial to the interest of the investing public or to the public interest and, in the case of executive officers, breach of any condition attached to the HKMA’s consent. In the case of an executive officer, a misconduct (as defined in the SFO) committed by a registered institution as a result of conduct which occurred with his consent or connivance or which was attributable to neglect on his part, is also regarded as the misconduct of the executive officer (Section 71C(13)).

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Опубликовано:

2014-10-16