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SFC

SFC

Joint financial probe good for reputation of Hong Kong

Raids on firms by two agencies bring home how important it is to make every effort to uphold the perception of a clean market and level playing field

PUBLISHED : Wednesday, 13 December, 2017, 12:35am
UPDATED : Wednesday, 13 December, 2017, 12:35am

Law enforcement tends to be more effective when agencies pool their resources and cooperate. Such collaboration is usually prompted by offences involving cross-border activity and money laundering such as terrorism and drug trafficking. But it is relevant anywhere that investigative and enforcement boundaries overlap. Hong Kong’s vibrant financial markets, with their links to the mainland, London and New York, are a prime example.

An unprecedented joint investigation by the Securities and Futures Commission and the Independent Commission Against Corruption is evidence of that. It culminated last week in raids on eight locations including homes and offices of senior executives of the financial firms Convoy Global Holdings and Lerado Financial Group, in which graft-busters made a number of arrests.

ICAC arrests Convoy chairman as investigation expands

SFC chief executive Ashley Alder says the joint probe has set the scene for similar investigations in the future. That is good news all round for Hong Kong and local, international and institutional investors alike. It is important to make every effort to uphold the perception of a clean market and a level playing field if Hong Kong wants to maintain its status as Asia’s financial centre. Investor protection is paramount.

In this case, the SFC acted “in the interest of the investing public”. What also set this matter apart is that the SFC issued orders to suspend share trading, something it rarely does unless deemed necessary to protect the interest of investors. In Hong Kong, listed companies usually voluntarily suspend trading.

SFC chairman Carlson Tong Ka-shing served notice earlier this year that the regulator had stepped up enforcement action in an attempt to ensure investor protection and achieve an orderly market.

The game-changing element of collaboration between the city’s financial markets regulator and its independent graft-buster has its genesis in moves within the SFC to unwind internal boundaries and overlaps. These could result in separate investigations of the same group of companies over wrongdoing such as market manipulation and insider trading, and over breaches of the Code on Takeovers and Mergers. Where common targets are identified in the early stages, a multi-departmental task force can coordinate the investigation.

Hong Kong’s SFC, ICAC poised for more joint probes on malfeasance

The joint SFC-ICAC action is not the only Christmas cheer for investors and market integrity, with a Hong Kong court rejecting a legal challenge to the SFC helping mainland regulators with investigations here into the violation of mainland securities laws. This now paves the way for more cross-border regulatory cooperation, which can only be good for investor protection.