Hong Kong market regulator sees more enforcement actions in 2015
Wednesday, 28 January, 2015, 12:11pm
“The increase in the number of fines issued, and their size, is no accident” – Freshfields
The Securities and Futures Commission substantially increased its enforcement activity last year as a study showed it has issued 56 per cent more disciplinary and criminal actions against companies and individuals last year than in 2013.This came after the SFC on Monday projected a budget deficit of HK$416.94 million for the financial year starting in April, mainly due to the hiring of 39 more staff which will cost HK$55 million to handle regulatory work.
The SFC has done a total of at least 128 enforcement actions, up from the previous year’s total of 82, according to annual study of Freshfields Bruckhaus Deringer based on publicly available data.
Freshfields’ Hong Kong disputes partner, Georgia Dawson, expected more enforcement action and significant fines would continue this year.
“The increase in the number of fines issued, and their size, is no accident,” she said.
“That intent coincides with much higher levels of resourcing in the SFC than we saw five or 10 years ago. The regulator has made it clear that proactive investigations – and more enforcement activity – will be the norm in Hong Kong for the foreseeable future,” Dawson said.
The firm’s China chairman and partner Teresa Ko Yuk-yin is an independent non-executive director of SFC but the study is not commissioned by the regulator.
Dawson expects the SFC to have more cross border co-operation after the local regulator in October has signed a memorandum of understanding with China Securities Regulatory Commission for more cross border enforcement under the stock market connection between Hong Kong and Shanghai.
“The SFC has been vocal in its support of cooperative measures between regulators in the Asia-Pacific region, and last month’s consultation paper sets out to clarify the ways in which the SFC can work together with regulators overseas,” Dawson said.
In monetary terms, the SFC has taken more from the pocket of companies and individuals as it imposed fines that are up by more than 52 per cent year on year to HK$62.8 million in 2014, compared with HK$41.2 million in 2013.
On average, the disciplinary fines for all companies and individuals stood at HK$4.038 million last year, up 50 per cent from HK$2.68 million in 2013.
In addition, the SFC last year sought court orders to require insiders or companies who were found guilty of misconduct to pay compensation to investors of over HK$2 billion.
This include the orders sought from insiders Du Jun and US hedge fund Tiger Asia. The SFC in September also sought compensation of HK$1.9 billion from state-owned Hong Kong listed conglomerate Citic and its former chairman Larry Yung Chi-kin and four former directors for the delay in disclosing forex losses in 2008.