Regulation of Insider Trading in Hong Kong

The growth of the Hong Kong securities market over the last twenty years has been marked by speculation, volatile securities prices, and widespread trading abuses. One important factor affecting the behavior of Hong Kong investors has been the flow of information to the market. For the most part, trading in the Colony is fed by rumors. The use of rumors in making investment decisions adversely affects the integrity of the market since most investors are unable to distinguish between rumors and facts. At the same time, a number of individuals have access to inside information because of their positions in the business community. These individuals often use this information to profit from securities transactions, often at the expense of the confused small investors. To combat the abuse of information, the Hong Kong government has made a number of attempts to regulate the securities market. This Note examines these attempts and compares them to the efforts of the regulatory authorities in the United States. After describing the regulatory histories of Hong Kong and the United States, the Note provides a comparison of the attitudes of regulators, the investigative facilities available, and the means of enforcement under both systems. The author concludes that Hong Kong must improve in all three of these areas if it is to control its securities markets