Corporate practices that misrepresent earnings, expenses, profits and losses, and which deceive shareholders and regulators, and result in overpriced shares and inappropriate rewards for senior company executives, have led to a welter of criminal charges, civil proceedings and regulatory actions in the United States.
This includes actions for fraud and false financial reporting, insider dealing, obstruction of justice, and evidence tampering.
The country reacted to the recent wave of corporate failures, corrupt accounting and other dubious practices by enacting the Sarbanes-Oxley Act on July 25, 2002.
But transparency and accountability are not maxims confined to corporate America. With the collapse of Enron and WorldCom, companies, shareholders and governments worldwide recognise the need to put their own houses in order and improve their standards of corporate governance.
Although Hong Kong has not enacted a similar comprehensive reform, the penalties and liabilities that already face recalcitrant company directors and their advisors remain harsh and wide-ranging.
With the new Securities and Futures Ordinance (which will probably come into effect by the end of 2002), senior executives, more now than ever, overlook their corporate responsibilities at their peril.
Fraud: In Hong Kong, fraudulent activity is punishable under a number of different areas of the law, including the Crimes Ordinance and the Theft Ordinance. For example, conspiracy to defraud, under the Crimes Ordinance, and fraud, under the Theft Ordinance, carry penalties of up to 14 years' imprisonment, while theft and obtaining a pecuniary advantage by deception carry sentences of 10 years. A company director convicted of an indictable offence involving a finding that the person in question acted fraudulently or dishonestly can lead to disqualification.
