SFC powers allow secret probe

PUBLISHED : Thursday, 26 January, 1995, 12:00am
UPDATED : Thursday, 26 January, 1995, 12:00am
 

A SECRET investigation is being carried out under sweeping powers granted to the Securities and Futures Commission (SFC).


In reply to a question by Legislative Councillor Chim Pui-chung, who represents the financial services industry, Michael Cartland, secretary for financial services, revealed yesterday that there was an investigation.


It also came to light that the closed-door investigation could have begun as long ago as last July.


Mr Chim asked Mr Cartland how many firms had been investigated under Section 33 of the SFC Ordinance and how many had been formally prosecuted or convicted.


Mr Cartland said that section 33 did not allow for the investigation of companies but Section 29a of the ordinance, introduced last July, did.


Section 33 deals with suspicious share trading activity.


Section 29a gives sweeping powers to investigate when persons concerned with the affairs of a company may have, in relation to its management, engaged in fraudulent acts, misfeasance or other misconduct towards the shareholders.


It allows for the checking of deals and for investigating of company records.


'Since the introduction, the SFC has commenced three investigations,' said Mr Cartland.


'Two of the investigations resulted in high court proceedings which are pending before the court. The one remaining investigation is on-going.' It is known that MKI Corp is under investigation under Section 29a, and an SFC petition to wind-up the company is currently going through the courts.


MKI's 25 per cent associate, Chesterfield, is company number two.


The SFC has taken out injunctions against several people including Arthur Lai Cheuk-kwan, former chairman of MKI, from interfering in the running of Chesterfield.


Court papers confirm the Section 29a status.


The investigation into MKI came to light because of a high profile raid on the firm during which officials from the SFC swooped on the firm's office in the Bank of China Tower and seized company books and documents.


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