Hong Kong: Settling Disciplinary Cases with SFC on Basis of Payment Without Admission of Liability Possible 

July, 2005 -

The SFC has recently settled a number of disciplinary cases on the basis of payment by the persons under investigations without admission of liabilities. Below are some examples of the settlement cases. SFC Withdrew Decision to Suspend Licence of a Licensed Representative The licence of a licensed representative was suspended by the SFC for six months by reason of his use of placing schemes to meet the placing requirements of the Listing Rules. The licensed representative appealed against, and was granted leave for judicial review, of the SFC’s decision. The licensed representative later entered into a settlement agreement with the SFC under which he agreed to withdraw his appeal and application for judicial review and to pay the SFC, on the basis of no admission of liability, a sum of HK$750,000 which will be paid into the government revenue. In return, the SFC withdrew its decision to suspend the licensed representative’s license. Sponsor Pays HK$30 Million to Settle SFC Disciplinary Proceedings The SFC commenced disciplinary proceedings against a sponsor alleging that the sponsor has not exercised due skill, care and diligence in the course of performing its duties as the sponsor for the listing of a public company. Without admission of liability, the sponsor has agreed to pay HK$30 million in full and final settlement of the SFC’s case which sum will be paid to the government revenue. In return, the SFC discontinued its disciplinary proceedings. Ex-gratia Payments to Investors Offered by Investment Adviser to Settle Disciplinary Proceedings The SFC commenced disciplinary proceedings against an investment adviser alleging, amongst other things, that the investment adviser has failed to conduct sufficient due diligence into two hedge funds (which were subsequently suspended from trading) before recommending them to its clients. By agreement, the SFC has decided to settle the disciplinary proceedings upon the investment adviser agreeing to make ex-gratia payments to all its investors remaining in the two funds as at their respective suspension dates on the basis of no admission of liability. According to the SFC, it will take into account the public interest first and foremost in considering settlements. Further, the SFC will balance the interests of the market against the benefits and costs of further litigation and investigation costs. It appears from the above examples that it is worth exploring with the SFC in appropriate cases the possibility of a settlement on the basis of payment without admission of liability.

 

MEMBER COMMENTS

WSG Member: Please login to add your comment.

dots