The Securities and Futures Commission (SFC) of Hong Kong has intensified its enforcement actions over the past year to tackle insider trading, market manipulation, corporate fraud, and other financial crimes, as highlighted in the agency’s latest annual report.
This publication coincided with the celebration of the regulator’s 35th anniversary as the “guardian of Hong Kong’s capital markets.”
During the 2023-2024 fiscal year, Hong Kong’s financial regulator pursued a record number of criminal charges and civil proceedings against individuals and corporations involved in serious misconduct in the city’s financial markets.
The SFC initiated 183 investigations and filed 50 criminal charges against 24 people over the 12-month period ending March 31, 2024.
The agency secured convictions against two individuals, with ongoing proceedings for the rest.
On the civil enforcement side, the SFC has 37 cases pending before the courts, seeking financial penalties and other orders against 204 entities and people.
Additionally, the regulator took disciplinary actions against 14 individuals and 12 corporations, imposing a total of $49.9 million in fines.
“We take proactive and resolute enforcement actions to protect investors, punish wrongdoers, and safeguard the reputation and integrity of our markets.
“Our strategic focus on high-impact cases helps us address key risks in financial markets and send strong deterrent messages,” the SFC commented in the report.
An example of this is the SFC’s first criminal prosecution for a fraudulent scheme in illegal short selling. The defendant pleaded guilty and was sentenced to 18 months in prison.
To enhance surveillance, the SFC issued a record 4,627 requests for trading and account records from brokers and posted a “high concentration” alert to caution investors about stocks with highly concentrated ownership.
“By leveraging our surveillance capabilities combined with data analytics, resources can now be directed towards cases of high impact and high strategic value that will have the desired deterrence effect,” the SFC noted.
A new investor identification system launched in March 2023 has significantly improved its ability to detect irregularities and problematic trading patterns in real-time.
Established in May 1989 following a stock market crash, the SFC’s powers were significantly expanded in 2003 with the introduction of the Securities and Futures Ordinance (SFO).
“The achievements we made and valuable experience gained over the years will stand us in good stead to steer Hong Kong’s capital markets,” said SFC Chairman Tim Lui.
“We remain committed to ensuring market integrity and resilience amid emerging trends and new challenges at the local, regional, and global levels.”
The SFC currently oversees nearly 50,000 registered firms and individuals.
In the last fiscal year, the regulator received over 7,200 new licensing applications: 7,035 from individuals and 220 from corporations.
Other prominent market watchdogs, such as Malta’s MFSA and Cyprus’ CySEC, have also released their annual enforcement reports, with varied results.
For instance, Malta’s MFSA took 77 enforcement actions in 2023, while Cyprus’ CySEC issued fines totaling over $2.2 million.