Hong Kong Ordinances

SECURITIES AND FUTURES ORDINANCE - SECT 59

Recognition of exchange controller

Division 4-Exchange controllers

(1) Subject to subsection (20) and section 62, no person shall become or
continue to be a controller of a recognized exchange company or recognized
clearing house unless the person is a recognized exchange controller.

(2) Where the Commission is satisfied that it is appropriate to do so-

   (a)  in the interest of the investing public or in the public interest; or

   (b)  for the proper regulation of markets in securities or futures
        contracts, it may, with the consent in writing of the Financial
        Secretary, by notice in writing served on a company, recognize the
        company as an exchange controller-

        (i)    subject to such conditions as it considers appropriate
               specified in the notice; and

        (ii)   with effect from a date specified in the notice for the
               purpose.

(3) Without limiting the generality of conditions which may be specified in a
notice under subsection (2), the Commission may, by notice in writing served
on a recognized exchange controller, amend or revoke any condition specified
in the first-mentioned notice or impose new conditions, where the Commission-

   (a)  is satisfied that it is appropriate to do so on a ground specified in
        paragraph (a) or (b) of that subsection; and

   (b)  has the consent in writing of the Financial Secretary to do so.

(4) Where the Commission amends or revokes any condition or imposes any new
condition by a notice under subsection (3), the amendment, revocation or
imposition takes effect at the time of service of the notice or at the time
specified in the notice, whichever is the later.

(5) Subject to subsection (6), a person who contravenes subsection

(1) commits an offence and is liable-

   (a)  on conviction on indictment to a fine of $1000000 and to imprisonment
        for 2 years; or

   (b)  on summary conviction to a fine at level 6 and to imprisonment for 6
        months.

(6) Where a person is charged with an offence under subsection (5), it is a
defence to the charge for the person to prove that the person did not know
that the acts or circumstances by virtue of which the person became a
controller of the recognized exchange company or recognized clearing house
concerned were such as to have that effect.

(7) Where a person-

   (a)  is a controller of a recognized exchange company or recognized
        clearing house in contravention of subsection (1) (and whether or not
        the person is charged with an offence under subsection (5) in relation
        to the contravention);

   (b)  did not know and had no reason to suspect the existence of any of the
        acts or circumstances by virtue of which the person became the
        controller of the recognized exchange company or recognized clearing
        house; and

   (c)  subsequently becomes aware of the fact that the person has become such
        a controller, the person shall serve on the Commission, not later than
        14 days after becoming aware of that fact, a notice in writing stating
        that the person has become such a controller.

(8) The Commission may, upon the service of a notice under subsection (7)-

   (a)  recognize the person as an exchange controller in accordance with
        subsection (2); or

   (b)  refuse to recognize the person as an exchange controller.

(9) Where a person is a controller of a recognized exchange company or
recognized clearing house in contravention of subsection (1) (and whether or
not the person is charged with an offence under subsection (5) in relation to
the contravention)-

   (a)  the Commission may, by notice published in the Gazette-

        (i)    declare that any votes cast at any meeting of the recognized
               exchange company or recognized clearing house (as the case may
               be) by the person after the person became the controller shall
               be void and of no effect; and

        (ii)   give such directions as it considers appropriate for any such
               meetings to be reconvened for voting anew on the business on
               which such votes were cast;

   (b)  the person or any of his associated persons shall not exercise any
        rights conferred on the person as a holder of securities in the
        recognized exchange company or recognized clearing house, or any
        rights in securities in any such company which are otherwise
        controlled by the person, except for the purpose of ceasing to be such
        controller; and

   (c)  the Commission may, by notice in writing served on the person, direct
        the person to take such steps as are specified in the notice-

        (i)    for the purpose of causing the person to cease to be such
               controller; and

        (ii)   within such period as is specified in the notice for the
               purpose.

(10) Without limiting the generality of steps referred to in subsection (9)(c)
which may be specified in a notice under that subsection to be served on a
person referred to in that subsection, such steps may consist in whole or in
part of steps proposed in writing to the Commission by that person.

(11) The steps specified in a notice under subsection (9)(c) may be framed so
as to afford the person on whom the notice is served a choice between
different ways of ceasing to be a controller of the recognized exchange
company or recognized clearing house concerned.

(12) A notice served under subsection (9)(c) shall not take effect-

   (a)  subject to paragraph (b), until the expiration of the period within
        which an appeal against the notice may be made under section 73; or

   (b)  if an appeal against the notice is made under section 73, until the
        appeal is withdrawn, abandoned or determined.

(13) Subject to subsection (14), a person served with a notice under
subsection (9)(c) who fails to comply with the notice commits an offence and
is liable-

   (a)  on conviction on indictment to a fine of $1000000 and to imprisonment
        for 2 years; or

   (b)  on summary conviction to a fine at level 6 and to imprisonment for 6
        months.

(14) It is a defence for a person charged with an offence under subsection
(13) to prove that the person exercised reasonable diligence to comply with
the notice concerned under subsection (9)(c) served on the person.

(15) Where a person served with a notice under subsection (9)(c) fails to
comply with the notice (and whether or not the person is charged with an
offence under subsection (13) in relation to the failure), the provisions of
Part 6 of Schedule 3 shall immediately apply.

(16) The provisions of this section, except subsection (5), shall apply to a
person who became a controller of a recognized exchange company or recognized
clearing house before the commencement of this section as they apply to a
person who became a controller of a recognized exchange company or recognized
clearing house on or after that commencement.

(17) Where a company becomes a recognized exchange controller, the Commission
shall cause notice of that fact to be published in the Gazette.

(18) Where a company is seeking to be a recognized exchange controller and the
Commission is minded not to recognize the company under subsection (2), the
Commission shall give the company a reasonable opportunity of being heard
before making a decision not to recognize the company.

(19) Where the Commission refuses to recognize a company or a person as an
exchange controller under subsection (2) or (8)(b), the Commission shall, by
notice in writing served on the company or the person

(as the case may be), inform the company or the person of the refusal and of
the reasons for it.

(20) Subsection (1) shall not apply to a person who is a controller of a
recognized exchange company or recognized clearing house if the recognized
exchange company or recognized clearing house is itself a recognized exchange
controller.

(21) A notice under subsection (9)(a) is not subsidiary legislation.