(10)

The SFC is the regulator of the securities markets in Hong Kong. Under Part III of the SFO, the SFC is responsible for supervising, monitoring and regulating activities carried out by recognised exchange companies and recognised exchange controllers. The SFC monitors a recognised exchange company to assess whether it complies with its statutory duties on an initial and ongoing basis. If the recognised exchange company fails to comply with such duties, the SFC has the power to take appropriate actions set out in Part III of the SFO. Sections 28 and 72 of the SFO provide that the SFC may withdraw the company's recognition as an exchange company. Under the SFO, the SFC has regulatory, administrative and investigative powers and may impose court orders by civil proceedings in accordance with Sections 213 and 214 of the SFO, administrative or criminal sanctions, as well as initiate or refer matters for criminal prosecution. Furthermore, pursuant to Section 399(1) of the SFO the SFC may publish codes and guidelines as it considers appropriate for providing guidance for the furtherance of any of its regulatory objectives, functions and the operation of any provision of the SFO. Recognised exchange companies are responsible for the establishment and enforcement of its own trading rules to ensure complianceby their EPs. To ensure continuing compliance with the SFO requirements, the SFC may review and audit the operations of the recognised exchange companies and recognised exchange controllers, their electronic trading and clearing systems and risk management. Under Section 23 of the SFO, the SFC may direct a recognised exchange company to make or amend any rules which it is permitted to make under that provision. The SFC may require a recognised exchange company to provide books, records and other information of its business or in respect of any trading in securities. The SFC can also order a recognised exchange companies to take particular actions, including requiring a recognised exchange company to take such action relating to the management, conduct or operation of their business or prohibit them from actions relating to the management, conduct or operation of their business specified in the Restriction Notice as per Section 92(1) of the SFO. Further, under Section 29 of the SFO, the SFC has the power to suspend dealings in securities and close a recognised exchange company in case it is of the opinion that orderly trading on the stock market is threatened. The SFO empowers the SFC to impose disciplinary measures (Part IX of the SFO) and prosecute offenders for securities related misconduct (Section 388 of the SFO). The SFC's surveillance and disciplinary oversight extend beyond listed companies and licensees to market participants, including investors. The SFC has powers under the SFO to take disciplinary, civil and criminal actions for market misconduct. Under Part XIII of the SFO the SFC has recourse to the Market Misconduct Tribunal and, where appropriate, imposing civil sanctions. Respectively, under Part XIV of the SFO the SFC can refer a case to the criminal law courts. Where appropriate the SFC may also seek warrants to search premises in accordance with Section 191 of the SFO and cooperate with domestic and overseas regulatory bodies to conduct investigations pursuant to Section 186 of the SFO.