But the proposal fell short of calls to make a breach of the rules a criminal offence.

The Asian financial hub is keen to avoid a repeat of the Citic Pacific scandal, when the Hong Kong-listed conglomerate revealed in 2008 that it faced a 18.6 billion Hong Kong dollar (2.40 billion US) loss from rogue currency bets.

The company said it kept the information secret for weeks in order to unwind the trades, a revelation that sparked a police investigation, drew public outrage and forced regulators to review how companies on the Hong Kong stock market disclosed information.

The government recommended a range of civil actions against companies and directors who breach the laws, including a fine of up to 8 million Hong Kong dollars.

Chan Ka-keung, the city's Secretary for Financial Services and the Treasury, said the proposed regime would create a "disclosure culture" in the market and strengthen Hong Kong's reputation.

"It would help demonstrate to the market our commitment to enhancing market transparency and quality, thereby enhancing Hong Kong's position as an international financial centre and the premier capital formation centre in the region."

However, shareholder activist David Webb, who is also a former non-executive director of Hong Kong Stock Exchange, said the sanctions were not strong enough.

"It represents a further watering down of the original proposals in 2003," he said, referring to when the government began to consult the financial sector about an overall revamp of the city's listing rules.

Webb also criticised the proposal for exempting listed companies receiving liquidity support from the government or central bank from the disclosure requirements.

"I don't see why that should be the case. It would be misleading to members of the public, who think they are investing in a solvent bank when it is in fact receiving government aid."

Phillip Khan, vice-chairman of the Alliance for Lehman Brothers' Victims, a group consisting of tens of thousands of Hong Kong investors who bought structured products backed by the failed US bank, said the proposal was "unacceptable."

"Without criminal sanctions, there won't be a so-called disclosure culture. The listed companies or bank staff will always think that they can cover up their misdeeds and get away with it," he said.

Under the proposal, the Securities and Futures Commission, the city's financial watchdog, would be given the power to investigate any suspected breach.

The Market Misconduct Tribunal, which currently deals with insider dealing cases, would have its jurisdiction extended to cover breaches of the proposed laws.

Apart from fines, the director or officer in breach of the laws could be disqualified from office and deprived of access to market facilities for up to five years.

Hong Kong's disclosure practice is currently regulated by non-statutory listing rules administrated by the stock exchange, which does not have any investigatory power.

Citic Pacific was bailed out by its parent company Citic Group, a state-run Chinese firm, and sparked a police investigation and the resignation of chairman Larry Yung in April last year.

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