Neoh departure creates a vacuum of integrity

PUBLISHED : Thursday, 30 April, 1998, 12:00am
UPDATED : Thursday, 30 April, 1998, 12:00am

When Alexander looked over his domain he wept, for there were no more worlds to conquer.' Securities and Futures Commission chairman Anthony Neoh is no megalomaniac autocrat, but he presides over an empire whose expansion has reached its limits.

As the search continues for his replacement, it is clear that Hong Kong has forged the regulatory landscape envisaged in the 1988 Ian Hay-Davidson report. Turf wars between banks, brokers and, in particular, the stock exchange will continue, but Mr Neoh leaves a market where the ground has been staked.

While the failure to pass its consolidated operating ordinance means there are more skirmishes to be fought, you would think the kudos of being Hong Kong's top securities regulator would make for a sought-after job.

Yet the Government's embarrassment at scraping around for a local candidate tells us much about this city. With a few exceptions, nobody of note wants to be the bad guy catching crooks.

Hong Kong Monetary Authority deputy chief executive Andrew Sheng Len-tao remains the most likely candidate. The Malaysian-born, one-time Bank Negara executive, World Bank veteran and now guardian of the Exchange Fund has all the credentials but remains on the sidelines. His candidacy is expected to come with conditions of extended powers.

The fact that no local-Chinese figured in the short-list of five would-be watchdogs reflects a reluctance of senior financiers to make enemies. The job involves tackling vested interests without fear or favour. As a barrister, Mr Neoh might have lacked the man-management background for an executive role, but his independence was clear.

A reprieve has been won by his term extension of three-months, but it is hard to see a British or Australian regulator running the joint. For Hong Kong as an international financial centre to again depend on a 'digger' from Down Under would be embarrassing. The irony of a post-colonial British hire might be too much to stomach.

While not ideal, a more palatable option would be a senior US regulator. One idea is an exchange programme whereby China Securities and Regulatory Commission executives spend two years in New York, while a US regulator runs Hong Kong. One name to emerge is Mary Shapiro, president of the National Association of Securities Dealers Regulation.

The notion of a 'name' has been crucial. Unlike the stock exchange chairman, the commission top job is effectively a combined chairman-chief executive role. A solid argument can be made for splitting the positions along the lines of the stock exchange. In this case, a tough chief executive could more easily be found to work under a high-profile chairman.

There can be no doubt a foreign hire is a second-best solution. An intuitive feel for the local corporate and trading culture cannot be learned. The ability to get on the telephone to counterparts in the mainland is vital, with the growth of red-chip and H-share listings and their generally lower standards of corporate governance.

Internally, the obvious candidate had been former deputy chairman Michael Wu Wai-chung, but having apparently been vetoed by the Government last year he resigned. Present deputy chairman Laura Cha May-lun has a busy style and even busier collection of power suits, but is thought to lack experience and has, in any case, ruled herself out.

The coming two years should see a number of high-profile enforcement actions, stemming from the wilder moments of last year's bull market. While the process of placing existing voluntary codes in statute must continue, paving the way for increased powers, this represent gradations of change.

It is hard to believe that in one of the most sophisticated financial centres there is no-one qualified for a job where most of the big political battles have been won. Mr Neoh might figure there are no more regulatory world's to conquer, but the lack of ambition among his contemporaries does not augur well for integrity in our markets.