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Following is a question by the Hon Tam Heung-man and a written reply by the Secretary for Security (in the absence of Secretary for Financial Services and the Treasury), Mr Ambrose S K Lee, in the Legislative Council today (April 25):
Question:
I have recently received complaints that some securities analysts have published articles in newspapers mentioning their personal investment decisions and actions, which may mislead the small investors in the stock market. In this connection, will the Government inform this Council whether it knows if the authorities concerned:
(a) had received complaints in the past three years about securities analysts expressing in the media views which might mislead investors; if they have, of the number of such complaints and how they were followed up;
(b) currently have mechanisms in place for preventing securities analysts from expressing in the media views that may mislead investors; if they have, of the details of such mechanisms; if not, whether the Government will consider establishing the relevant mechanisms; and
(c) will consider stepping up education for investors on how to comprehend and interpret views of securities analysts; if they will, of the relevant details; if not, the reasons for that?
Reply:
Madam President,
In response to the questions raised by the Honourable Tam Heung-man, we have sought the advice of the Securities and Futures Commission (SFC) and the Secretariat of the Broadcasting Authority (BA). Our reply is as follows:
(a) Since January 2004, the SFC has received a total of 13 complaints about securities analysts expressing views in the media which might mislead investors. Of these complaints, 11 were not substantiated while the remaining two are being examined by the SFC.
(b) Concerning television and radio broadcasting, broadcasting licensees are required to comply with the Code of Practice issued by the BA when providing news, financial programmes and personal views programmes, including making reasonable effort to ensure that the "factual contents" of such programmes are accurate. Upon receiving complaints involving the broadcast of the views of securities analysts, the BA will seek the professional advice of the SFC as necessary in the course of investigation. If the complaints are substantiated, the BA will impose sanctions on the licensees depending on the severity of the issue.
If the securities analysts are licensed by the SFC to carry on regulated activities, they must comply with the following requirements set out in the Code of Conduct issued by the SFC when they prepare and publish investment research on securities (including stocks and derivatives) or otherwise disseminate all or part of their investment research in the mass media (printed materials and broadcasting):
(i) When the abovementioned person provides analyses or comments on securities in respect of a listed corporation in the mass media in his/her personal capacity, including appearing in person, he/she shall disclose the following at the time the analyses or comments are provided:
(I) his/her name;
(II) his/her licence status; and
(III) where he/she and/or his/her associate has a financial interest in the listed corporation, the fact of having such an interest.
(ii) When the abovementioned person is asked by members of the audience, or otherwise by a journalist, for analyses or comments on specific securities, he/she may offer such analyses or comments, provided that he/she makes the disclosures as mentioned above.
(c) The SFC has been putting efforts in investor education to enhance investors' abilities to comprehend and interpret the views of securities analysts. For example, a series of feature articles are posted under the "Considering Analysts' Advice" column at the InvestEd website (an investor education website of the SFC) to enhance investors' understanding of the subject. The SFC also advises the public on this subject at different kinds of education seminars. Between April and June 2005, the SFC broadcasted an educational drama series (comprising ten weekly episodes) at the RTHK Radio 1 to educate investors on how to interpret the views of securities analysts and remind them of the importance of understanding the assumptions behind an investment recommendation. Since November 2004, the SFC has also published a total of 25 educational articles in newspapers, magazines and the free monthly investor e-newsletters of the InvestEd website, to remind investors of how to deal with analysts' investment recommendations. Looking ahead, the SFC will continue to invest resources to enhance investor protection and education.
Ends/Wednesday, April 25, 2007
Issued at HKT 12:44
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