To: Sir Auric Goldfinger who wrote (83987 ) 5/5/2003 6:43:53 PM From: SEC-ond-chance Read Replies (1) | Respond to The SFC has noted that some overseas securities firms, which are not licensed in Hong Kong, offer local investors the opportunity, via hyperlinks on their websites, to open accounts and trade in stocks overseas. The SFC welcomes the increase in investment opportunities for local investors, and also supports technological advances that make securities dealings more efficient and less costly. The Commission has a duty, however, to protect local investors by overseeing the activities of all securities firms who target Hong Kong investors. To ensure the standards of financial intermediaries and to afford investors an effective protection, registration with the SFC is a must for companies engaging in securities dealing in Hong Kong unless they are exempted. Whether a company is an online broker or a traditional broker makes no difference. The case of GlobaLinkAsia.com Ltd (GLA), which was recently prosecuted for unregistered dealing and the issuance of unauthorised advertisements, demonstrates the SFC's Unregistered dealing in cyberspace It is the SFC's job to oversee all securities firms who target Hong Kong investors - even in cyberspace commitment to impartial enforcement and investor protection. Between May 2000 and May 2001, GLA, a subsidiary of a licensed securities dealer in the US, operated a local website which was hyperlinked to the online trading platform of its parent company in the US. Investors could open accounts and trade stocks in the US via the website. GLA was not registered and it already breached the Securities Ordinance. The company also kept and distributed promotional documents and account opening forms at its Hong Kong office, and referred potential clients to its website for details and to open accounts. These documents and the materials on the website contained an invitation to the public to deal in securities, which had not been authorised by the SFC. Hence, GLA was also in breach of the Protection of Investors Ordinance. The SFC successfully prosecuted GLA for these offences. The company pleaded guilty to six summonses before Mr P C White at Western Magistracy on 5 June 2002. It was fined a total of $280,000 and ordered to pay costs of $14,178 to the SFC. In considering the penalty, Mr White commented that the offences were very serious. The potential damage of unregistered companies operating from an overseas mother company to solicit funds from Hong Kong investors, who were left with no possibility of recovery in the case of default, was enormous. The penalty imposed was intended to deter not only the defendant company, but also other parties who intended to act similarly. The SFC would like to remind market participants that the mere presence of a hyperlink to an overseas trading platform does not normally trigger a licensing requirement . The presence of any inducement, or invitation, to visit the related sites through the links concerned may, however, mean a licence is required. In general, investors should make sure that they are dealing with qualified professionals who have registered with the SFC. For more details, market practitioners can refer to the “Circular on Provision of Financial Information on the Internet - Licensing Requirements” issued by the SFC on 30 J une 2000. The Circular is available on the SFC website under the "Intermediaries, Licensing & Investment Products - Update for Intermediaries - Others " section.hksfc.org.hk
