Hong Kong market regulator takes on ‘collection agent’ role for wronged investors
SFC follows international peers by pursuing compensation for victims rather than fines in some cases of securities misconduct
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On a warm Saturday in early May, the kind of day most would choose to spend on a hike or at the beach, hundreds of Hongkongers instead stood for hours in a queue at Edinburgh Tower in Central.
But despite the loss of a pleasant weekend afternoon, none would be likely to consider it time wasted. They were there claim their fair share of HK$1.5 billion (US$191 million) owed to independent shareholders of Giordano International in the largest settlement on record by the city’s Securities and Futures Commission (SFC).Two wholly owned subsidiaries of Chow Tai Fook Nominee (CTFN), a company linked to the Henry Cheng Kar-shun family, reached the settlement with the market regulator in February after they failed to make a mandatory general offer as required under the Takeovers Code.AdvertisementSome shareholders of the now-defunct China Evergrande Group are also due some money – about HK$1 billion – after the SFC last month settled with accounting firm PricewaterhouseCoopers Hong Kong (PwC HK) after what the regulator termed serious breaches of auditors’ professional duties.With HK$2.5 billion in settlements in just a few months, the SFC is aligning with an international trend, joining regulators from the US, UK and Europe in a shift to fighting for monetary compensation in cases of financial misconduct, rather than jail terms and fines. The approach aims to avoid lengthy legal battles while buttressing investor confidence by sending a strong message about market integrity.
Advertisement“Hong Kong regulators are likely to continue to use settlement as a new enforcement strategy, to act as a collection agent seeking compensation for small investors,” said Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators. “This makes sense because Hong Kong does not have US-style class-action lawsuits for small investors to seek claims. They can only rely on the SFC to fight for their rights.”
Traditional penalties, such as heavy fines or licence suspensions, could be painful for companies or individuals who committed misconduct, Tang said.
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