The implementation of the Securities & Futures Ordinance tomorrow represents a milestone in the development of the regulatory regime governing our securities and futures markets.

This was the message from Secretary for Financial Services & the Treasury Frederick Ma today. He said the Ordinance brings about a fair, efficient and transparent regulatory regime that inspires confidence, facilitates market innovation and development, and is on par with prevailing international standards.

"Effective operation of the new regulatory regime will strengthen and enhance our status as an international financial centre," Mr Ma said.

Securities & Futures Commission Chairman Andrew Sheng said the new ordinance, which comes into effect April 1, is the most important and comprehensive securities legislation in Hong Kong.

The new ordinance allows ample room for market development and accords a greater degree of protection to investors.

To ensure that investors are given accurate and timely information on listed securities to make informed investment decisions, a 'dual-filing' system will be implemented.

Under the new system, the commission will become the statutory regulator of listed company disclosures. Listed companies and listing applicants are required to file announcements or listing documents to both Hong Kong Exchanges & Clearing and the commission.

The disclosure threshold for substantial shareholders of listed companies has been reduced from 10% to 5%, and the notification period from five days to three.

Under the new legislation, the new Market Misconduct Tribunal will handle cases like insider dealing, market manipulation, dissemination of false and misleading information and other forms of misconduct on a civil route.

It will decide on cases using a less stringent civil standard of proof and is able to impose a wide range of deterrent sanctions, such as disgorgement of profits.

Criminal prosecution may also be brought against people involved in market misconduct, with a maximum penalty of 10 years' imprisonment or a fine of $10 million.

Regarding the regulation of intermediaries, a new single licensing system will bring greater cost effectiveness to intermediaries. On the other hand, the new ordinance gives the commission greater flexibility in disciplinary sanctions concerning intermediary misconduct.

Apart from partial suspension or revocation of licences, a fine of up to $10 million can be imposed.

A new single investor compensation fund will replace the existing compensation schemes. The new regime is based on a per-investor compensation limit of $150,000 in respect of trading in securities and futures contracts.

Therefore, an investor can ascertain in advance the compensation amount in the event of intermediary default. Coverage is also extended to both exchange and non-exchange participants, banks and securities margin financiers.

The commission will issue a booklet entitled SFO & You to explain the major changes and implications brought about by the new legislation. The brochure will be published on April 1.