Hong Kong Monetary Authority

Fears over expanded SFC role prompt further bill changes

PUBLISHED : Friday, 01 June, 2001, 12:00am
UPDATED : Friday, 01 June, 2001, 12:00am

The Government will further amend the controversial Securities and Futures Bill to curb the expanded power of the securities watchdog under the proposed legislation, according to a government source.

The changes are aimed at easing worries by legislators that the bill would give the SFC too much power, the source said.

In addition, the Government would make changes to the bill in areas related to investor compensation, he said.

These changes are part of an effort by the Government to build support for the bill among legislators.

On Monday, it announced a proposal that would allow the SFC to penalise banks for securities malpractices.

The source confirmed a Business Post report that legislators had postponed a vote on the proposed legislation until the end of the year.

'With the latest proposals added to the bill, the Government is confident the bill will receive the support of legislators for it to become law,' the source said.

Legislators said the bill suggested allowing the commission to transfer assets or wind up any companies if it suspected a brokerage of endangering a client's assets.

They said this might give the SFC too much control as the bill did not clearly indicate when and how such power could be used.

The source said the Government would change the bill to restrict the exercise of such power under certain conditions, for example, when it comes to the commission's attention that a brokerage is near collapse.

Also, the Government would consider additional changes to the bill to spell out the source of funding for the investor compensation fund.

It will also consider raising the proposed HK$150,000 compensation cap for individual investors should their brokerage fail.

On Monday, the Government announced other changes to the bill that would make the SFC, rather than the Hong Kong Monetary Authority, the regulator of securities activities by banks.

This would include meting out fines of up to HK$10 million and public reprimands.

The proposals have aroused opposition from banks.

David Eldon, chairman of the Hong Kong unit of HSBC, opposed the move, saying it would lead to a regulation overlap, resulting in all banks being regulated by the SFC and the HKMA.

However, the source said the HKMA and the SFC would work closely together to avoid any such overlap.

'As long as banks' securities business receive the same level of regulation as brokers, this will create a level playing field among banks and brokers,' the source said.

The bill, when it becomes law, will replace the existing securities laws.

It will include regulations on Internet trading, insider dealing and securities business at banks.