The Securities and Futures Commission is examining its legal options in the face of the Government's self-declared exemption from the securities disclosure law, according to sources.
The move comes as the exemption faces increasing scrutiny and criticism from members of the business and legal community.
By law, investors must make a public disclosure when they accumulate more than 10 per cent of a company's shares. On Wednesday the Hong Kong Monetary Authority said it was 'not bound' by the law and that disclosure would only play into the hands of the speculators it was trying to defeat.
Analysts said the exemption raised complex legal questions for the SFC or any other actors which may seek to challenge the exemption.
'They may be correct in the letter of the law but in the spirit of the law - and in the spirit of free markets - they are not correct,' said a strategist with an overseas investment bank.
The HKMA said its exemption was justified by the Interpretation and General Clauses Ordinance, which states that no ordinance is binding on the Government 'unless it is therein expressly provided or unless it appears by necessary implication that the Government is bound'.
Analysts said the 'necessary implication' phrase was an important caveat to the Government's claims of exemption.