Overhaul of securities law faces final hurdle in Legco
The Legislative Council is expected to pass the controversial Securities and Futures Bill on Wednesday, marking an end to the 10-year debate about securities law reform.
Some legislators still publicly oppose a key provision that allows Chief Executive Tung Chee-hwa to intervene in the activities of the Securities and Futures Commission (SFC), Hong Kong's markets watchdog. But even if they were to vote against it, this is not expected to prevent the bill becoming law.
Legislator Sin Chung-kai, who chairs the Legco sub-committee set up to study the bill, said Democratic Party and independent legislator Margaret Ng Ngoi-yee was expected to oppose the provision.
'The Democratic Party considers that the provision would affect the independence of the SFC,' said Mr Sin, who is also financial affairs spokesman for the Democrats.
The Government has rejected calls to amend the provision, saying it needs to have last-resort authority over the SFC.
Mr Sin said that, even if some legislators voted against this provision, they would not have enough clout to prevent the bill being passed.
'After so many meetings and so much debate over the past years, most of the controversial issues in the bill have been resolved,' he said.
The Securities and Futures Bill is considered to be the most important change yet to securities law in Hong Kong. It is also one of the longest-debated bills in the history of Legco.
The bill was first drafted in 1992 and has been subject to public consultation four times in the past 10 years.
The Legislative Council sub-committee has held more than 140 meetings on the bill since it was tabled in December 2000. It was scheduled to go to a vote in July last year but this was postponed to allow legislators more time to discuss it.
The bill will combine and replace all 10 existing securities and futures ordinances.
It will also include new provisions to regulate Internet trading, criminalise insider dealing and tighten regulation of banks' securities activities.
Mr Sin said that, even if the bill were passed on Wednesday, it would not be enacted immediately.
This will not happen until legislators have reviewed 39 pieces of legislation that outline the operating details of the new law.
Mr Sin believed it would be several months before the bill could be enacted.
'This would mean the implementation of the many new regulations in the bill may only be seen in the second half of this year,' he said.
Legislator Henry Wu King-cheong, who represents brokers, has indicated support for the bill after the Government agreed to strengthen its regulation of banks' securities departments.
Mr Wu had strongly opposed the legislation because it allowed the Hong Kong Monetary Authority to continue to regulate banks' securities departments, giving rise to concern about double standards.
After pressure from brokers and legislators, the Government amended the bill last year to allow the SFC to replace the HKMA.
Bank securities departments will be liable to fines of up to HK$10 billion and public reprimand for malpractice.
The HKMA will still routinely inspect banks' securities departments but investigations will be passed on to the SFC.
Mr Wu said: 'This amendment has made the bill more acceptable, though not perfect.'
He said the most important next step would be for the SFC and HKMA to sign a memorandum of understanding covering co-operation on the regulation of banks' securities operations.
The bill protects accountants who report alleged fraud uncovered during audits from being sued by their clients.
Accountants had opposed the bill because of concern about its impact on the accountant-client relationship.
But Eric Li Ka-cheung, legislator for accountants, said he would now support it as the Government had added an explanatory note in the bill.
'The Government will add the note to make it clear that the provisions would provide protection to the accountants when they report fraud,' he said.
'But accountants have no obligation to do so.
'This would help to keep the trust and relationship between the clients and the accountants, while at the same time it would help accountants to report alleged fraud without fear of being sued by clients.'