Dealing with Misconduct in the Financial Markets: A Hong Kong Perspective
| Published date | 01 February 2001 |
| Date | 01 February 2001 |
| Pages | 357-364 |
| DOI | https://doi.org/10.1108/eb026000 |
| Author | John Reading |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 8 No. 4
Dealing with Misconduct in the Financial Markets:
A Hong Kong Perspective
John Reading
INTRODUCTION
The integrity of the financial markets in the Hong
Kong Special Administrative Region (Hong Kong)
is maintained by an approach which involves coop-
eration between government, the banking sector,
the Hong Kong Monetary Authority (the HKMA),
the Securities and Futures Commission (the SFC)
and the industry
itself.
This paper deals briefly with the roles played by
the major participants in the regulatory regime in
Hong Kong, in ensuring as far as is possible that the
financial markets operate fairly and transparently,
providing adequate protection to investors, and that
those guilty of misconduct are appropriately dealt
with. Where participants in the market, whether
they are officers of listed companies, investors or
share traders, do breach the rules or break the law it
is important that they be subjected to the appropriate
sanctions, with a view not only to punish them for
their conduct, but also to deter others from engaging
in similar conduct and conveying to would-be
investors both locally and internationally that there
are appropriate measures in place for maintaining a
'clean' market.
SOME BACKGROUND
'Hong Kong is an international financial centre
with an integrated network of financial institutions
and markets. The Government's policy is to
maintain and develop an appropriate legal, regula-
tory, infrastructural and administrative framework
with the aim of providing a level playing field for
all market participants, maintaining the stability of
the financial and monetary systems and enabling
Hong Kong to compete effectively with other
major financial centres.'1
Hong Kong is a Special Administrative Region of
the People's Republic of China. It is situated at the
mouth of the Pearl River delta, covers an area of
1,098 square kilometres, and has a population of
around 6.8 million. It is an international centre for
trade, finance, business and communications,
currently ranked as the world's ninth largest
trading entity. It has the busiest container port
in the world, and one of the busiest airports. It
is characterised by
'its high degree of internationalisation, business-
friendly environment, rule of law, free trade and
free flow of information, open and fair competi-
tion, well-established and comprehensive financial
network, superb network of transport and com-
munications infrastructure, sophisticated support
services, and a well-educated workforce comple-
mented by a pool of efficient and enterprising
entrepreneurs.'2
In order to achieve the aim of 'providing a level
playing field for all market participants' and at the
same time maintaining the status of a free market
economy, essential for attracting appropriate forms
of investment, the Hong Kong regulatory frame-
work is stringent, operating
'under effective and transparent regulations, which
meet international
standards'.3
Unfortunately those with a dishonest bent will still
attempt to circumvent the rules, and those who are
caught must be dealt with. The ultimate sanction
for misconduct in connection with the financial
markets is a criminal conviction, but there are a
range of methods of dealing with delinquent beha-
viour, short of bringing a criminal prosecution
(these will be mentioned below).
THE ROLE PLAYED BY GOVERNMENT
The Hong Kong economy is a robust one, charac-
terised by the strength of its currency, which is
linked to the US dollar,4 a simple tax system with a
low rate of taxation,5 and substantial fiscal and
foreign exchange reserves. Cooperation between
the Treasury, the HKMA6 and the banking sector is
Journal of Financial Crime
Vol.
8, No.
4.2001.
pp. 357-364
© Henry Stewart Publications
ISSN 0969-6453
Page 357
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