Tougher penalties imminent

PUBLISHED : Wednesday, 22 March, 2000, 12:00am
UPDATED : Wednesday, 22 March, 2000, 12:00am

Controversial legislation aimed at increasing penalties for illegal short-selling is likely to be passed by the Legislative Council now that the Government has agreed to make amendments.

Brokers and investment banks have complained that the Securities Amendment Bill 1999 places too severe a burden on intermediaries.

Under the bill, brokers may face criminal charges if they fail to ensure clients have the stock borrowing arrangements before they execute short selling orders.

After nearly three months of debate, Legislator Eric Li Ka-cheung said the concessions meant the bill was likely to be passed shortly.

Fung Chi-kin, legislator representing the financial services constituency, said he would throw his weight behind the bill if the Government agreed to make one further concession.

Mr Fung wants the Government to agree that brokers need not have sight of documentary evidence of clients' stock borrowing arrangements before executing short selling trades.

'It would be difficult for brokers to get the documents from the investors before they trade for clients,' he said.

According to Mr Fung, the Government is likely to make this concession.

The bill would increase the maximum penalty for illegal short-selling to a fine of $100,000 and two years' imprisonment.

At present, the maximum penalty is a $10,000 fine and six months' jail.