Ken  should  clearly  know  that  the  orders  of  his  company’s  clients  are non-public information which will have a substantial effect on the trend of the futures market.   However, he still deliberately delays effecting transactions for clients and conspires with Anna to make use of this market-sensitive information for personal gain.   Both of them have engaged in front running and thus violate the *Codes of Conduct.

Ken and Anna may be guilty of a corruption offence too.   Under Section 9 of the Prevention of Bribery Ordinance (POBO), Ken's sharing of the profit from the front running operation can be treated as accepting an advantage from Anna as a reward for his doing an act in relation to his principal’s affairs, i.e. passing the information of his company orders to Anna.

*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.

Kim and Angela might have breached the Securities and Futures Ordinance for disclosing and acting on unpublished price sensitive information. They might have also exposed the bank to legal liability since the bank had bought the shares as a result of inside information.

Kim might have further violated the internal code of conduct^[1] of her bank as she leaked customer's information to a third party, even though in this case the third party was also a member of her bank.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should release customer information to a third party without written consent from the relevant customer, unless the release complies with the Personal Data (Privacy) Ordinance or he is required or permitted to do so by law.”

Peter might breach the Organized and Serious Crimes Ordinance or the Drug Trafficking (Recovery of Proceeds) Ordinance as well as the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. 

Peter also commits a corruption offence under Section 9 of the Prevention of Bribery Ordinance (POBO) for soliciting from Joe an advantage as a reward for leaking confidential information from his bank. He may also violate the Code of Conduct^[1] of his bank as he fails to preserve the confidentiality of the bank's internal information.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (AI) (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should, during or after termination of his employment with the AI, except in proper course of his duties or with the written consent of the AI, divulge or make use of any secrets or of any correspondence, accounts, connections or dealings of the AI or its customers or of any knowledge gained in relation thereto during his employment.”

Bank employees are required to treat their customers' banking affairs as private and confidential.Cindy might violate the Code of Conduct^[1] of her bank for releasing customers’ information of her bank to a third party without their consent. Such a disclosure is also strictly prohibited in accordance with the Personal Data (Privacy) Ordinance (PDPO).

Cindy breached Section 9 of the Prevention of Bribery Ordinance by accepting an advantage, i.e. $1,000 for each set of data released to Fred. Fred in turn committed an offence of offering a bribe.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should release customer information to a third party without written consent from the relevant customer, unless the release complies with the PDPO or he is required or permitted to do so by law.”

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.

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.

Benny occupies a position which has access to the sensitive information on the merger plan for Interlock and Happy Diet.   His subsequent action in abusing the information to deal in their stocks for personal gain has not only violated the

*Codes of Conduct but also the insider dealing provisions of the Securities and Futures Ordinance.

*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.

Aaron occupied a position from which he had access to sensitive information about his client's merger plan. He might commit an offence of insider dealing under the Securities and Futures Ordinance and might also breach the Code of Conduct^[1] of the bank by leaking client’s information to an outsider without his consent and abusing the information to deal in the stocks for personal gain. Aaron should not deal, whether directly or indirectly, in the shares or other securities of any company listed on The Stock Exchange of Hong Kong Limited when he possessed non-public inside information obtained as a result of his employment.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should deal in the shares or other securities of any listed company when possessing privileged or price-sensitive information that is not generally known to the shareholders of that company and to the public. Staff should not disclose such information to any third party.”