SFC seeks criminal sanctions against lies to watchdogs

PUBLISHED : Wednesday, 03 March, 1999, 12:00am
UPDATED : Wednesday, 03 March, 1999, 12:00am

The Securities and Futures Commission is consulting with professional bodies on a proposal making it a criminal offence to give false information to financial regulators.

The proposed move is part of the 30 anti-speculative measures announced by the Government last September, which aim to close the loopholes in legislation and increase investor protection.

The SFC has presented a consultation paper to the law society, the Hong Kong Society of Accountants, Hong Kong Investment Funds Association and other bodies seeking comment on the proposal.

The Government wants to make it a criminal offence to mislead the SFC and the stock and futures exchanges, but the SFC paper suggested expanding this to cover clearing houses since they perform important risk-management functions.

The Department of Justice would determine an appropriate maximum penalty for the proposed offence.

Legislation now makes it a criminal offence for giving false or misleading statements in certain circumstances, including information given by brokers or fund managers when they apply for registration with the SFC and information in their annual reports submitted to the commission.

The law now also makes it a criminal offence to include misleading information in prospectuses or to mislead the SFC during an investigation.

Legislation now, however, does not cover misleading information to the stock exchange, futures exchanges and the clearing houses.

'In such circumstances, the provision to these bodies of misleading or false information would be detrimental to Hong Kong's markets and to the interests of the investing public,' the SFC said.

'In a bid to fill these gaps in Hong Kong's law, the SFC proposes creating a new offence, drafted in broad terms so that it covers all relevant situations.' The SFC believes it is not appropriate to criminalise the actions of those who give misleading information because of carelessness, only when it is done knowingly or recklessly.

Those who 'deliberately lie' to the SFC or 'those who do so without caring whether or not the information is untrue or misleading will be guilty of an offence', it said.