Securities (Amendment) Bill 1998

Amend the Securities Ordinance.

Enacted by the Legislative Council.

1. Short title

This Ordinance may be cited as the Securities (Amendment) Ordinance 1998.

2. Establishment of compensation fund

Section 99 of the Securities Ordinance (Cap. 333) is amended---

(a) by renumbering it as section 99(1);

(b) by adding---

"(2) The Commission may, with the approval of the Financial Secretary, pay into the compensation fund from its reserves such sum of money as it thinks fit.".

3. Money constituting the compensation fund

Section 101(1) is amended by adding before paragraph (a)---

"(aa) all money paid by the Commission into the fund under section 99(2);".

4. Claims against the fund

Section 109(3) is amended by repealing everything after the semicolon and substituting---

"but for the purposes of this subsection any amount paid---

(a) from the compensation fund, to the extent that the fund is subsequently reimbursed in respect of any such payment (not being a deposit made under section 107), but only in respect of the first $8,000,000 so reimbursed; and

(b) under section 113(5A),
shall be disregarded.".

5. Power of the committee of the Exchange
Company in respect of claims

Section 113 is amended by adding after subsection (4)---

"(5A) If it appears to the committee of the Exchange Company that the aggregate of all claims arising out of the default of a stockbroker, if allowed, may be in excess of the total amount limited by or under section 109, and the committee---

(a) having regard to the circumstances of the default, considers it appropriate to do so; and

(b) after taking into account all ascertained and contingent liabilities of the compensation fund, considers that the assets of the fund so permit, it may, with the prior approval of the Commission, allow in respect of any claim which has been allowed or partially allowed by the Exchange Company or by an order of the Court under this Part the payment, before the apportionment under section 120(2), of such sum for compensating the claimant as it thinks fit.".

6. Provision where fund is insufficient to meet claims
or where claims exceed total amount payable

Section 120 is amended---

(a) in subsection (1), by adding after "equitable"---

", having regard to the sums already paid, if any, to the claimants under section 113(5A)";

(b) in subsection (2)---

(i) by repealing "this Part" and substituting "section 109";

(ii) by adding after "equitable"---

", having regard to the sums already paid, if any, to the claimants under section 113(5A)";

(c) by adding---

"(3) For the avoidance of doubt, upon payment under subsection (2), the claim of a claimant who has been compensated under section 113(5A) and any order of the Court relating to the claim shall be absolutely discharged whether or not the claimant has received any further payment under the apportionment.".

7. Transitional

Sections 109, 113 and 120 of the Securities Ordinance (Cap. 333) ("the principal Ordinance") as amended by this Ordinance shall also have effect as to claims made in relation to a person specified in a notice published under section 112 of the principal Ordinance on or after 27 January 1998.

Explanatory Memorandum

The object of this Bill is to amend the Securities Ordinance (Cap. 333)---

(a) to enable the Securities and Futures Commission to inject money into the Unified Exchange Compensation Fund ("compensation fund") (clauses 2 and 3);

(b) to empower the committee of the Exchange Company to, under certain circumstances, authorize payment to claimants against the compensation fund, before the normal apportionment procedure takes place, discretionary sums as compensation (clause 5);

(c) to exclude the discretionary sums in the calculation of the limit on the total amount payable out of the compensation fund, and to restrict the amount of money recouped by the Securities and Futures Commission in exercise of its subrogation rights that may be paid out for compensation of claimants (clause 4); and

(d) to expressly provide that the claim of a claimant who has been paid a discretionary sum is absolutely discharged on payment of the total amount under the apportionment procedure even if he is not entitled to any further payment thereunder (clause 6).

2. The Bill also enables the committee of the Exchange Company to exercise its power to allow discretionary sums to claimants before apportionment in relation to certain claims made before the enactment of the Bill (clause 7).