SFC gets fining powers over firms, directors

Penalty level in the air but commission chairman pushes for maximum of $10m

The government has agreed in principle to give the Securities and Futures Commission the power to fine companies and directors for breach of listing rules, according to a senior government source.

The fine's limit has yet to be decided. Commission chairman Martin Wheatley is pushing for a maximum of $10 million, while the government wants a lower figure.

'The SFC already has the power to impose a fine of up to $10 million on brokers and other licensed persons. It is reasonable to allow the commission to impose a similar level of fine on the directors or companies breaching the listing rules,' Mr Wheatley said.

The source said the issue was likely to be resolved before the long-awaited market reform bill is put before the Legislative Council in October.

'After a long discussion with the SFC chairman, the administration accepts that it is important for the commission to have the power to impose fines on rule breakers,' the source said. 'At the end of the day, it will be up to the SFC to enforce the listing rules with statutory backing.'

The proposed law changes included in a consultation paper released in January last year will give statutory backing to certain listing rules, allowing the SFC to impose tougher penalties or prosecute violators, instead of leaving it to the stock exchange, which can only issue public censures.

The consultation document originally suggested giving the SFC the power to fine firms and directors up to $5 million, while allowing the Market Misconduct Tribunal, chaired by a judge and two independent members, to impose fines as high as $8 million.

Later, the tribunal's fining limit was lifted, but the SFC was not given the power to impose fines because of objections from respondents who said the commission would become investigator, jury and judge.

However, Mr Wheatley insists the SFC must be allowed to 'manage the listing rules and to impose a wider range of penalties on rule breakers'.

He said the commission would need a three-tiered structure to enforce the listing rules.

'For minor cases, the SFC could impose a fine or issue banning orders against offenders,' he said.

'For more serious cases, we will refer them to the Market Misconduct Tribunal and the very serious cases will go to court.'

'All three levels are very important. If we do not have the fining power, it will be very difficult for the SFC to administer the listing rules [effectively],' he said.

Mr Wheatley rejected suggestions that the commission would become too powerful, adding that 'people could seek to overturn our decisions by appealing to the Securities and Futures Appeal Tribunal, which will run independently from the commission'.

Democratic Party economic affairs spokesman Sin Chung-kai said giving the commission fining powers would allow quicker handling of minor cases rather than passing them on to the tribunal.

'It is important for the commission to have the power to impose fines'

Senior government source