Hong Kong SFC Shifts to Monetary Settlements for Financial Misconduct

On a warm Saturday in early May, the kind of day most would choose to spend on a hike or at the beach, hundreds of Hongkongers instead stood for hours in a queue at Edinburgh Tower in Central.

With HK$2.5 billion in settlements in just a few months, the SFC is aligning with an international trend, joining regulators from the US, UK and Europe in a shift to fighting for monetary compensation in cases of financial misconduct, rather than jail terms and fines. The approach aims to avoid lengthy legal battles while buttressing investor confidence by sending a strong message about market integrity.

“Hong Kong regulators are likely to continue to use settlement as a new enforcement strategy, to act as a collection agent seeking compensation for small investors,” said Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators. “This makes sense because Hong Kong does not have US-style class-action lawsuits for small investors to seek claims. They can only rely on the SFC to fight for their rights.”

Traditional penalties, such as heavy fines or licence suspensions, could be painful for companies or individuals who committed misconduct, Tang said.