Securities & Futures Commission of Hong Kong

Enforcement philosophy

Enforcement objectives

One of our primary roles is to enforce the laws governing Hong Kong's securities and futures markets. Misconduct often gives rise to losses for investors or disrupt the securities and futures markets. Through taking firm and decisive disciplinary actions against offenders, we strive to promote fairness in the markets, protect the investing public and minimise crime and misconduct.

Our strategic approach

We have established six key programmes of enforcement work (see below). Each programme is a strategic priority that is tackled with the required resources. This ensures that the results of one programme are not undermined by our work to address regulatory issues in another. Our overall objective is to identify wrongdoing efficiently in each priority programme and to bring wrongdoers to justice so that neither the market nor investors would have to pay for the consequences of the misconduct.

  • Corporate governance of listed companies
  • Insider dealing
  • Market manipulation
  • Unlicensed dealing
  • Intermediary misconduct
  • International co-operation

Corporate governance of listed companies

This programme focuses on tackling misconduct by listed companies and their directors who abuse their positions and shareholders' funds. We prosecute the listed companies and their directors, seek disqualification orders, and rectify the consequences of wrongdoing through remedial orders under section 214 of the Securities and Futures Ordinance (SFO).

Insider dealing

Insider dealing destroys fairness and orderliness of the market and undermines market confidence. We use all remedies available to attack insider dealing by prosecuting insiders and referring cases to the Market Misconduct Tribunal for imposition of criminal or civil penalties. Through the court, we also seek orders to freeze insider-dealing gains and to remediate damages caused by the misconduct.

Market manipulation

Market manipulation erodes investors’ confidence in the market as they jeopardise the genuine supply of and demand for shares. Common forms of market manipulation are appearance of inflated supply or demand by placing fictitious orders, price ramping and rigged transactions1.

We deploy a comprehensive set of surveillance tools to detect manipulative activities and take actions by prosecuting manipulators and referring cases to the Market Misconduct Tribunal for the imposition of criminal or civil penalties. Where appropriate, we seek court orders to freeze market manipulation gains and to remediate damages caused by the misconduct.

Unlicensed dealing

Our licensing regime ensures that only fit and proper individuals are permitted to act as financial intermediaries. We prosecute those who fake their credential and where appropriate, seek to trace and freeze money raised by illegal operators so that it can be returned to victims. Firms that harbour activities by unlicensed staff also are prosecuted and disciplined.

Intermediary misconduct

We have the power to discipline individuals and firms that are licensed by or registered with us (referred to as "regulated persons"). Upon our identification of misconduct, we may impose on the regulated persons disciplinary action/s set out in the SFO. Common types of misconduct that may lead to disciplinary actions include sponsor failures, mis-selling of investment products and internal control failures.

Disciplinary sanctions include:

  • fine (up to the maximum of $10 million or three times the profit gained/loss avoided, whichever is the higher, for each misconduct)
  • prohibition of application for licence or registration
  • reprimand
  • revocation of licence or registration
  • suspension of licence or registration 

More details on our disciplinary process are available in Disciplinary proceedings. We also have the power to resolve disciplinary proceedings by agreement when it is considered appropriate to do so in the interest of the investing public. 

International co-operation

Under the bilateral and multi-lateral agreements signed with overseas regulatory counterparts, we exchange information with and provide investigatory assistance to overseas regulators. We also work closely with Mainland regulatory bodies to deal with regulatory issues arising from the increasing cross-border activities between Hong Kong and the Mainland.

Enforcement outcomes

Through criminal prosecutions, proceedings in Market Misconduct Tribunal, civil proceedings in the Court of First Instance and disciplinary actions against intermediaries, we aim to deliver the following outcomes:

Punishment – Justly punish wrongdoers for their misconduct.

Deterrence – Deter wrongdoers from repeating the misconduct and warn other market participants against mimicking similar misconduct

Remediation – Ensure that the consequences of wrongdoing are remedied by wrongdoers and their accomplices.

1 Rigged transactions include wash transactions, ie, arrangements between two or more parties to trade together to give the appearance of active trading when, in fact, the same shares are being passed around. Trading by nominees on behalf of the same person when there is no real change in ownership is also considered rigged transactions.

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