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Case Studies
Circulation of inside information within the institution
As a senior credit officer in a bank, Kim was handling a loan application from an overseas investment company, which planned to buy a substantial amount of shares in a local telecommunications company. She knew that the bank was likely to support this project and was also aware that such a bulk purchase will boost the share price of the target company when the deal was announced. To make a mark for herself in the bank, she phoned Angela, her former supervisor, who was then a trader in the bank's stock broking section.
She told Angela about the proposed acquisition and her opinion that the bank would make a lot of money by buying the stock before the bid was made public. Subsequently, Angela bought a major block of shares for the bank. When the deal was announced, Angela was questioned by her compliance officer about why she purchased shares in the target company. It became clear that the purchase followed a "tip-off" and inside information.
Case Analysis
Kim and Angela might have breached the Securities and Futures Ordinance for disclosing and acting on unpublished price sensitive information. They might have also exposed the bank to legal liability since the bank had bought the shares as a result of inside information.
Kim might have further violated the internal code of conduct[1] of her bank as she leaked customer's information to a third party, even though in this case the third party was also a member of her bank.
[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should release customer information to a third party without written consent from the relevant customer, unless the release complies with the Personal Data (Privacy) Ordinance or he is required or permitted to do so by law.”