From allegations of insider trading and dodgy shareholder votes to complex investment schemes that left some ordinary investors penniless, the incidents raise questions over how free from restraint Hong Kong's free-market should be.

David Webb, a prominent shareholder activist, said the controversies were chipping away at Hong Kong's reputation and that the government should have moved more quickly in dealing with them.

"We need a government that can walk and chew gum at the same time," he said.

In February, the company that runs Hong Kong's stock exchange watered down proposals to toughen limits on directors trading in shares in their own companies.

The decision was made after the original proposals faced strong opposition from some of the city's powerful tycoons, who have huge influence over government policy and many other aspects of the city's life and business.

In March, the exchange was then pressed to halt a controversial 10-minute window at the end of the trading day to settle the closing price of shares.

The system was blamed for a dramatic last-minute plunge in shares of banking giant HSBC, when a single transaction order wiped more than 16 billion US dollars off the value of the company in seconds.

Public anger over Hong Kong's high-powered financial industry has been on the boil since last September, when the collapse of US investment bank Lehman Brothers hit some of the city's most vulnerable investors hard.

Many had purchased so-called "minibonds", which were presented as rock solid investments, but whose value was wiped out when the US firm collapsed.

Regulators have already reprimanded two financial firms for failing to properly explain the risks to investors, and more than 5,000 cases are still being investigated.

The latest potentially damaging episode is the unfolding courtroom drama over whether telecoms giant PCCW should be allowed to go into private hands, a case which has pitted tycoons against regulators.

PCCW chairman Richard Li's battle to privatise the city's largest fixed-line operator was halted by the city's Court of Appeal on Monday just hours after the High Court had given it the green light.

Li is the son of Hong Kong's richest man, Li Ka-shing, and the courtroom drama has involved a cast of other notable businessmen.

The 2.1 billion-US-dollar bid is opposed by the Securities and Futures Commission (SFC), who claimed a shareholder vote in February approving the deal was unfairly manipulated by Li's associates.

Making the original decision to grant the buy-out, High Court judge Susan Kwan pointed out there was no law against such vote-rigging and said it was not the court's place to create legislation.

Kwan's decision sparked fury from disillusioned minority shareholders.

"I would not invest in any stocks or properties in Hong Kong from now on. The market is not transparent and unfair. It's not worth it," shareholder Leung Kwok-keung told AFP outside the court.

Veteran stockbroker Francis Lun, general manager of Fulbright Securities, said the decision was bad news for Hong Kong investors.

"If planting votes and manipulating the vote is no obstacle to privatisation, then majority interests can do anything they wish," he said.

"This is ridiculous."

The PCCW case has shown that many of the city's laws on company listing and privatisation have failed to catch up with the market's development, said Billy Mak, associate professor of finance at Baptist University in Hong Kong.

A spokesman for the government's Financial Services and the Treasury Bureau told AFP that the financial crisis had made stakeholders more sensitive to the operation of the markets.

But he added that in an open society like Hong Kong, it is "not unusual that market participants have different views on the same issue."

He argued that the PCCW case had highlighted Hong Kong's independent rule of law, a key attribute to its role as international financial centre.

He said the government had adopted a "phased approach" to improve the city's financial regulation structure, aimed at better protecting investors in the light of the Lehman minibonds case.

For shareholder activist Webb, the one bright aspect of the PCCW case was the tough stance of the SFC regulator, which has challenged some of the city's most established businessmen and accused them in court of vote-fixing.

But Lun said investors also had to take some responsibility.

"Hong Kong has to do much more to protect small -- and gullible -- consumers," he said.

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