Declaration of Investments by Civil Servants

Information Notefor the LegCo Panel on Public Service Meeting on 19 March 2001Declaration of Investments by Civil ServantsPurposeThis note briefs Members on the results of a review of the currentsystem governing the declaration of investments by civil servants.Background2. At the Panel meeting on 30 October 2000, we informed Membersthat the system on declaration of investments by civil servants was beingreviewed. The review has now been completed and the results are set out in thispaper.The Policy3. An honest and clean civil service is vital to maintaining public trustand support in the Government. The Administration is firmly committed toupholding a high standard of integrity and conduct within the civil service. Thatcommitment is reflected in the civil service rules, regulations and system ofdeclaration of investment which prescribe clear guidelines on conduct and thesanctions against breaches.4. The following principles, amongst others, govern the conduct ofeach and every member of the civil service:-(a) he must not subordinate his duty to his private interests, nor puthimself in a position which creates a reasonable suspicion that hehas done so;(b) he must not use his official position to further his private interests;(c) he must not engage in private financial transactions in areas wherehe might reasonably be suspected of having access to privilegedinformation; and(d) he must not engage in any occupation/undertaking which mightconflict with the interests of the government nor act in a mannerwhich might bring the service into disrepute.

- 2 -Any civil servant in breach of the foregoing principles which are codified in thecivil service rules are liable to disciplinary action leading to dismissal in seriouscases (see paragraph 6 below).Safeguards against conflict of interest5. Special rules and guidelines governing the circumstances underwhich each and every civil servant should avoid putting himself in a positionwhere his official duties are in conflict (or may be seen to conflict) with hisprivate interests, pecuniary or otherwise, are contained in individual Civil ServiceRegulations (CSRs) and Circulars. These rules and guidelines cover subjectsincluding the declaration of investments; acceptance of advantages; indebtedness;insolvency; use of official information; outside work; employment after leavingthe service, etc. Moreover, for officers holding posts with access to sensitiveinformation, they are in addition required to regularly declare their privateinvestments (see paras. 7 - 10 below). A list of the relevant regulations andcirculars is given in the Annex.Sanctions6. Apart from the clear standards of probity demanded of civil servants(para. 4 above), the widely disseminated rules which give guidance to civilservants on how to avoid being put in a conflict of interest situation (para. 5above); and the detailed declaration/reporting requirements that have beendeveloped over the years (paras. 8 to 10 below), we have sanctions that are wellunderstood. Failure to comply with any of the rules and declaration/reportingrequirements is a disciplinary offence and may result in an officer beingdismissed or compulsorily retired from the civil service. Where an officer abuseshis official position to further his private interest (such as misuse of sensitiveinformation obtained in his official capacity for personal gain), he may be subjectto criminal prosecution. Depending on the facts of the case, he may be chargedunder the common law offence of misconduct in public office or, where the caseinvolves the solicitation or acceptance of advantages, the Prevention of BriberyOrdinance.System on declaration of investments7. Under our current policy on declaration of private investments, westrive to ensure a proper balance between civil servants’ right to privateinvestments and privacy on the one hand, and upholding civil service impartialityand accountability on the other. It is important to note that the existingdeclaration arrangement forms part of the wider system described in the previous

- 3 -paragraphs and serves to facilitate identification of conflict of interest situationsso that proper safeguards and management actions could be introduced at theearliest possible opportunities. This system is based on self-reporting by theofficers and guarded by disciplinary sanctions for non-compliance.8. The existing system on declaration of private investments has thefollowing key features:-(a) posts requiring regular declaration are classified into two tiers. TierI consists of 27 strategic posts, including those filled by the mostsenior civil servants at Bureau Secretary level who have access tohighly sensitive information. Tier II posts include all directorateposts and posts designated by Bureau Secretaries/Heads ofDepartment as carrying high risk of exposure to conflict of interestsituations. At present, there are about 3,100 Tier II posts;(b) Tier I and II officers are required to report their global investmentsannually and biennially respectively. Between the annual orbiennial declarations, they have to report any investment transactionwhich is equivalent to or exceeds $200,000 or 3 months’ salary,whichever is the less, within 7 days;(c) all Tier I and II officers have to declare the occupation of theirspouse;(d) Tier I officers are additionally required to register their financialinterests annually. The register is open to public inspection onrequest; and(e) officers in posts not designated are not required to make declarationregularly. Nonetheless, all civil servants shall continue to beresponsible for avoidance of conflict of interest situations and toreport individual cases as and when necessary.9. On top of these declaration requirements, Bureaux/Departmentsmay, in the light of their specific circumstances and operating needs, prescribesupplementary declaration requirements for compliance by their staff. Theserequirements are equally binding as CSRs. At present, 29 Bureaux/Departmentshave developed additional declaration guidelines which cover over 52,000 postsin these bureaux/departments. These additional guidelines include the reportingof investment transactions in specified trades, irrespective of amount or whetherthe officer is occupying a Tier I or II post; the reporting of the employment ofspouse/relatives who are working in companies with official dealings with the

- 4 -Bureau/Department; more frequent declarations; and the reporting of investmentsby the officers of certain grades on appointment. There are also cases where theBureaux/Departments have prescribed restrictions on investments in specifiedtrades or business areas.10. Where a real or apparent conflict of interest situation comes to light,management may prescribe actions that are operationally necessary and legallyjustified, e.g. an officer may be required to divest himself of the investments, torefrain from acquiring or disposing of the investments, or to put his investmentsin a blind trust.The Review11. The current system on declaration of investments was last revised inSeptember 1998, which led to additional enhancements introduced to the system.In our recent review, we have concluded that the current system has been largelyoperating well. Nonetheless, we have identified a number of areas forenhancements which will help further strengthen the effectiveness of the presentdeclaration arrangements. These include:-(a) we will invite Bureau Secretaries to critically review the designationof posts and, on the basis of operational need and relative risk ofexposure to conflict of interest situations, to recommend if necessarythe designation of additional senior posts as Tier I posts (para. 8above) to which the requirement of public disclosure applies;(b) the register of financial interests declared by Tier I officers(accessible to public inspection on request) is now updated annually.In future, the register will be up-dated within one-month of a Tier Iofficer reporting an investment transaction which falls under theitems for public disclosure;(c) at present, company directorship is not explicitly mentioned in therelevant CSR which defines the sort of investment that must bedeclared and reported. We will place it beyond doubt that companydirectorship is a form of interest in a company which must bedeclared and reported;

- 5 -(d) at present, Tier I and II officers are not required to declare bankdeposits (irrespective of currencies or amount). However, they haveto report any single currency transaction which exceeds $200,000 or3 months’ salary, whichever is the less, within 7 days. Forconsistency, we propose to dispense with the general requirement ofreporting currency transactions exceeding $200,000 in value wherethey involve conversion of the same amount from one currency toanother. Nevertheless, Bureaux/Departments will be invited toconsider prescribing, for compliance by their staff, requirements forreporting currency transactions having regard to departmental needs;and(e) we will issue a more detailed reference guide for designatedreviewing officers in Bureaux/Departments to assist them in theexamination of declaration returns. Through more proactive andvigilant vetting, conflict of interest situations can be identified at theearliest opportunity.12. Meanwhile, we will remain vigilant and continue to take proactiveactions in encouraging more Bureaux/departments to prescribe supplementarydeclaration guidelines specific to their operational needs and circumstance, andin reminding all officers of their responsibility to avoid (and report all instancesof) conflict of interest with their investments or those of their spouse/relatives.13. In addition, we will continue with our education and outreachactivities. Through the “Civil Service Integrity Programme”, representativesfrom Civil Service Bureau and the Independent Commission Against Corruptionhave since 1999 embarked on an outreach programme to Departments to helpthem enhance integrity management. Through visits and face-to-face dialoguewith members of senior management, assistance is rendered to Departments inreviewing and developing departmental guidelines on conflict of interest andacceptance of advantages, having regard to situations specific to departmentaloperations. We have visited all 67 Government departments and 40 of them haveissued or are in the course of revising supplementary departmental guidelines onconflict of interest. Since January 1999, we have arranged seminars or trainingsessions on civil service integrity for over 32,500 civil servants. We have alsoissued a handbook (titled “Ethical Leadership in Action”) to senior managers toassist them in strengthening ethical values among their staff and in guardingagainst corruption in their organizations.

- 6 -14. In 2001/2002, we plan to organize added experience-sharingworkshops for departmental managers on common integrity issues, e.g.acceptance of entertainment, unauthorized loans, etc. To enable departmentalmanagers to have more ready access to ethics development materials and tofacilitate the sharing of information and experience amongst differentgovernment departments, we also plan to set up an electronic information andresource centre on integrity management by the end of the year.Way Forward15. The Civil Service Bureau will keep the efficacy of our declarationsystem under regular review, whilst maintaining efforts in promoting integrity inthe civil service.Civil Service BureauMarch 2001

AnnexList of Relevant CSB Circulars, CSRs and PublicationsI. Conflict of InterestCSB Circular No. 19/92Conflict of InterestII.Acceptance of Advantages and EntertainmentCSB Circular No. 17/92CSB Circular No. 18/92CSB Circular No. 7/94 (C)CSB Circular Memorandumdated 12.12.85CSB Circular Memorandumdated 11.4.86CSB Circular MemorandumNo. 19/94CSRs 431 – 435CSR 444CSR 448The Acceptance of Advantages (ChiefExecutive’s Permission) Notice 1992 andRelated MattersThe Acceptance of Advantages andEntertainmentSponsored VisitsAcceptance of Complimentary TicketsAcceptance of Complimentary TicketsAcceptance of Advantages - Free RaffleTicketsAcceptance of EntertainmentAcceptance of AdvantagesRetirement GiftsIII.InvestmentsCSB Circular No. 8/98Declaration of Investments by Civil Servants

- 2 -CSB Circular MemorandumNo. 19/99 dated 1.11.99CSB Circular Memorandumdated 21.9.2000CSRs 461 – 466Tracker Fund of Hong KongMass Transit Railway Corporation Limited(MTRCL) sharesInvestmentsIV.Outside WorkCSB Circular No. 13/95CSB Circular MemorandumNo. 50/96 dated 7.10.96CSB Circular No. 3/97CSR 326CSRs 550 –564Acceptance of Outside Appointments afterRetirementOutside Appointments during Pre-retirementLeave and after RetirementPermission to Take Up Outside Appointmenton Completion of AgreementAcceptance of Outside Appointment afterRetirementOutside WorkV. IndebtednessCSB Circular No. 4/97CSB Circular MemorandumNo. 28/91CSRs 455 – 459CSRs 480 – 482CSRs 483BookletIndebtedness in the Civil ServiceMoney Lending and Borrowing by CivilServants and Sources of FinanceInsolvency and BankruptcyLending Money and Borrowing Money atInterestUse of Subordinates as GuarantorsSources of Finance for Civil Servants

- 3 -VI.Reporting Crime and CorruptionCSB Circular No. 20/79CSB Circular No. 10/80CSB Circular No. 9/94Reporting of Criminal OffencesReporting of Attempted BribesAllegations of Corruption Against CivilServantsVII.Production by Government Officers of Publications ContainingPaid AdvertisementsCSB Circular No. 6/77CSB Circular No. 23/77CSRs 530 - 531Production by Government Officers ofPublications Containing Paid Advertisements- Civil Service Regulation 530Production by Government Officers ofPublications Containing Paid Advertisements- Civil Service Regulation 530Publications and Public DonationsVIII. OthersBookletCivil Servants’ Guide to Good Practices