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Dear All,

I would welcome any comments on one small issue regarding the HK Securities Ordinance (Chap 333), which I cannot figure out for myself without resorting to contorted explanations. Lionel Smith was quick in enlightening me as to possible ways of interpreting what follows, but he also suggested that I post it all to the list.

S 84 says stockbrokers/dealers must pay into a trust account money received from clients to buy shares and from buyers where they have sold shares for the clients. That is all normal. Equally normal is s 85(1) which says the money in the trust account is not available for payment of the debts of the dealer or liable to be taken in execution.

But 85(2) says any payment in contravention of 85(1) is void ab initio 'and no person to whom the money is paid shall obtain any title to it'.

Does this last phrase cover the shopkeeper, who is paid for the eggs and the butter with money the dealer has taken from the trust account? Will he therefore have to give the money back?

Instinct would tell me that the sub-section is nonsense in the case I put, and that the money belongs to the innocent grocer as soon as the eggs are bought (i.e. the banknotes are delivered to him).

The only solutions to this impasse I can come up with are not really satisfactory. For instance, s 86 reads 'claims not affected': 'Nothing in this part shall be construed as taking away or affecting any lawful claim or lien which any person has (1) in respect of any money held in a trust account or (2) in respect of any money received for the purchase of securities or from the sale of securities before the money is paid into a trust account'. Can the shopkeeper's claim to the value of the eggs and butter be construed as one such claim?

Arianna Pretto

Brasenose College
Oxford