Law Society sounds alarm bells on bill
Hong Kong's legal profession is to sound warning bells about the controversial Securities and Futures Composite Bill tomorrow at a Legislative Council hearing.
The Law Society has thrown its weight behind critics of the extensive powers levied to the Securities and Futures Commission under the proposed bill.
The society is concerned about the rule-making powers of the SFC that it claims go 'well beyond current rule-making powers' of the regulator.
'We find it troubling that the SFC should have the power, in effect, to create criminal offences punishable with substantial fines and imprisonment, and that it can do so without market consultation,' the society says.
A breach of SFC rules would incur a jail term of up to two years and a fine of HK$200,000.
The SFC now has the power only to make rules in respect of specific matters set out in legislation.
'In the interests of certainty and justice, any other matters which are intended to attract criminal penalties should be set out in the bill itself,' the society will tell legislators.
'Alternatively, any rules proposed to be made by the SFC which would attract criminal liability should be subject to public consultation, vetting by the legislative council and/or approval by the chief executive in council,' the society adds.
Chairman of the society's securities law committee Pauline Ashall said that until drafts of the rules were produced, it was difficult to identify where they might be likely to have criminal sanctions.
Although conceding that flexibility could be advantageous to a regulator, 'just from a legal perspective, it does seem surprising that an unelected regulatory body is given such wide powers', she said.
However, University of Hong Kong law faculty's Doug Arner said regulators in Britain and the United States had rule-making powers similar to those suggested in the bill.
Debate has intensified as the proposed law heads for another debate in Legco tomorrow.
A group of 10 investment banks, making its second joint submission, welcomed changes to last year's White Bill consultation paper, which it had described as 'oppressive'. However, it listed a fresh series of concerns, including criminal liability for misrepresentations made negligently, lack of safe harbours, and overlapping categories of 'market misconduct'.
Market misconduct has been a key area of debate. The Law Society was concerned about the 'considerable scope for a single incident to lead to multiple criminal, civil and disciplinary actions against the same person or group of persons'.
It is particularly concerned that some of the categories of market misconduct are 'very broadly drafted', making it difficult for market practitioners and their legal advisers to determine exactly what kind of transaction would infringe the law.