Under Section 9 of the Prevention of Bribery Ordinance (POBO), it would be an offence for Mr To (an employee), without the approval of his employer (the listed company) to accept advantage (i.e. $100,000 offered by Tony) as a reward for leaking out confidential information relating to the company’s property acquisition plan.  He had also abused the trust placed on him by his employer for misusing the company’s information for personal gain.  Tony might also violate POBO by offering bribes.

Furthermore, according to the Code of Ethics of Estate Agents Authority, estate agents or salespersons shall refrain from activities during their practice which may infringe the law. They shall, in the course of business, provide services to clients with honesty, fidelity and integrity, and protect their clients against fraud, misrepresentation or any unethical practices in connection with real estate transactions. Tony had breached the Code of Ethics for offering bribes and engaging in fraudulent activities in deceiving compensation.

Mr Kwok, as an employee, might commit an offence under Section 9 of the Prevention of Bribery Ordinance (POBO) for, without the approval from his employer, soliciting and accepting an advantage (i.e. the ‘under-the-table’ commission offered by Raymond and Freddy) for recommending the listed company to buy their properties.  Meanwhile, Raymond and Freddy both might also violate Section 9 of POBO for offering bribes.

Individual ethics and corporate culture are among the key factors which shape a company’s corporate governance. Company directors and senior executives serving the company should serve as role models.

Mr Kwok, who held an influential position at the company’s property investment, should have used the power bestowed on him by the listed company to protect its interests.  However, Mr Kwok abused his company’s trust for personal gain and violated the law instead.  

It is important for the company to work on an ethical culture at the corporate level through practicing ethical leadership, giving clear guidance on ethical standard expected of staff, managing integrity training and putting in place a comprehensive internal control system which helps company prevent and detect crime or malpractices as early as possible.

To protect the interests of investors, the listed company prohibited their agents or employees from abusing their official positions for personal gain. Mr Chan and Jenny were commissioned by the listed company to sell the property. They had to comply with the listed company’s policy on acceptance of advantages and were not allowed to solicit or accept any work-related advantage. Under the Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror of the bribe shall also be guilty of the offence. Mr Chan and Jenny might commit an offence under Section 9 of POBO for accepting bribe. This went against the spirit of the tender system and also prejudiced the buyer’s interests.

By attempting to secure business through corrupt means, Sidney’s action went against the spirit of fair competition and damaged the reputation of estate agency trade. He might also commit an offence under Section 9 of POBO for offering bribe.

Furthermore, they all might have breached the Code of Ethics of the Estate Agents Authority which states that estate agents and salespersons shall refrain from activities during their practice which may infringe the law.

Dominic violates the *Codes of Conduct as well as the insider dealing provisions of the Securities and Futures Ordinance.  He commits an insider dealing offence because he has used non-public information, provided by an insider of Treasure Hunt, to purchase the company’s stocks for financial gain. Tony is regarded as an insider under the law because he is a person who, being the financial controller of Treasure Hunt, has access to confidential information relating to the company.

Tony and Dominic may also commit a corruption offence under Section 9 of the Prevention of Bribery Ordinance (POBO) because Tony accepts from Dominic a share of the profit from the insider dealing as a reward for leaking the confidential information  of  his  company  to  Dominic.    Tony  may  commit  an  offence  of accepting a bribe while Dominic may commit an offence of offering a bribe.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

Financial Projection for Listing

Surely Patrick should handle the financial estimates and anticipated sales growth meticulously.  He should document his bases of assumptions and agree those with the Managing Director.  All these would be reviewed by the merchant bank which sponsored the listing as well as the reporting accountant, and the eventual delivery of the forecasts would be a matter of public and regulatory scrutiny once the company got listed.  Although the Managing Director did not bother which accounting method to use, Patrick should ensure that the accounting method followed all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants.

Managing Director's Request for Manipulation of Management Accounting Data

Patrick should explain to the Managing Director that, first of all, a wilful act of manipulation of accounting data is a criminal offence.  Secondly, accounting information presented to banks would most likely be audited.  Once the banks realised that there were significant discrepancies between management accounting data previously presented and the audited accounting data, they would ask for explanations which would well call into question the credibility of the company.  In the worst case, banks could withdraw financial support to the company.

Request for a Cheque by the Assistant to General Manager

It would be a breach of the Section 9(3) of the Prevention of Bribery Ordinance (POBO) if the General Manger used false document e.g. false reimbursement records, to deceive his company. Furthermore, if the cheque payment was offered by the General Manager to the Mr Wong as an advantage in disguise to induce or reward for latter’s assistance in granting credit facilities to the company, both the General Manager and Mr Wong would breach Section 9 of the POBO.

Patrick should report the matter to the Managing Director and explain the legal consequences of being involved in such an act.  Patrick should take the opportunity to urge the Managing Director to issue a set of code of conduct to strengthen internal control of the company. He should report to the ICAC if corruption was suspected.

Offering of ‘Valuable Information'

The valuable information provided by Benny is likely to be insider information which, if used to deal in listed securities, could have severe legal consequences.  Patrick should make it clear to Benny that his evaluation of the banks was done in an objective manner and there would be no need for Benny to reciprocate with any 'gift' as a result of OPQ bank being appointed.  If Patrick's dinner with Benny is no more than a social entertainment, Patrick does not need to avoid it.  If by accident Patrick had heard of the valuable information from Benny but he did not deal, counsel nor procure other persons to deal in the securities, he would not breach the insider dealing provisions under the Securities and Futures Ordinance.

Jimmy violated the Codes of Conduct[1] issued by Securities and Futures Commission because he preferentially allocated the shares to Amy, thereby giving favour to her and putting other clients at a disadvantage.  He also breached Section 9 of the Prevention of Bribery Ordinance (POBO) by soliciting and accepting an advantage, i.e. 10,000 shares as a reward for allocating the Blue Water stocks to Amy despite the short supply. Although Jimmy asked Amy to place the stocks in the account of his wife, he was still guilty of a corruption offence. Under Section 9 of the POBO, a person is considered to have accepted an advantage even though another person acting on his behalf receives the advantage.

[1] Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.