The Securities and Futures Commission (SFC) of Hong Kong has taken aggressive enforcement actions over the past year to combat insider trading, market manipulation, corporate fraud, and other financial crimes, according to the agency's latest annual report.
Its publication coincided with the celebrations of the 35th anniversary of the regulator's operation as the "guardian of Hong Kong’s capital markets."
Hong Kong Financial Regulator Cracks Down on Market Misconduct and Fraud
HK’s financial watchdog brought a record number of criminal charges and civil proceedings against individuals and corporations suspected of serious misconduct in the city's financial markets during the 2023-2024 fiscal year.
SFC initiated 183 investigations and laid 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 against the others.
On the civil enforcement front, the SFC has 37 cases pending before the courts seeking financial penalties and other orders against 204 entities and people. The regulator also took disciplinary actions against 14 individuals and 12 corporations, levying $49.9 million in total 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,” SFC commented in the report.
For example, the SFC also brought Hong Kong's first criminal prosecution for employing a fraudulent scheme in illegal short selling. The defendant pleaded guilty and was sentenced to 18 months in prison.
To strengthen surveillance, the SFC issued a record 4,627 requests for trading and account records from brokers. It also posted a "high concentration" alert to caution investors about trading 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 said, noting that a new investor identification system launched in March 2023 has significantly enhanced its ability to detect irregularities and problematic trading patterns in real-time.
35 Years of Protecting Capital Markets
The Securities and Futures Commission (SFC) was established in May 1989, precisely 35 years ago, in response to a stock market crash two years earlier. In 2003, the Securities and Futures Ordinance (SFO) was introduced, significantly expanding the scope of the institution's functions and powers.
"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 the SFC’s Chairman Tim Lui. "To this end, we remain steadfast in our commitment to ensuring market integrity and resilience in the face of emerging trends and new challenges at the local, regional, and global levels."
The SFC now oversees nearly 50,000 registered firms and individuals. In the last fiscal, the regulator received over 7,200 new licensing applications: 7,035 from individuals and 220 from corporations.
Several other prominent market watchdogs, including Malta's MFSA, have also recently published their annual enforcement reports. Enforcement actions in 2023 totaled 77, of which 60 were administrative penalties, amounting to €444,800. For comparison, Cyprus' CySEC issued fines of over $2.2 million, and the UK's FCA issued fines of nearly £53 million.
