Time to move on
With just a month to complete its investigation, the 181-page report of the Panel of Inquiry on the Penny Stocks Incident is a thorough piece of work. Robert Kotewall and Gordon Kwong Chi-keung have left no stones unturned in tracing and analysing what happened before and after the penny stocks crash on July 26, which had followed the release of a consultation paper on the possible delisting of such stocks by Hong Kong Exchanges and Clearing (HKEx) the day before.
The panel's conclusion: the crash was the result of an unfortunate combination of factors. While there were 'some instances of errors of judgment, some perhaps even understandable in the circumstances, a few mishaps, examples of miscommunication and some systemic wrinkles here and there', none of the shortcomings was major, and no heads need to roll.
Given the current culture of blame that pervades the community, the panel's acerbic remarks will not go down well with those who are inclined to regard the exercise, however thorough and comprehensive, as a whitewash.
The Secretary for Financial Services and the Treasury, Frederick Ma Si-hang, has been the biggest target of public criticism, because of his initial remarks that he should not be held responsible as he was unaware of the consultation paper's contents before it was released. Apparently, the panel found, he was genuinely unaware of the proposals because of lapses by his administrative assistant and his failure to read the mountains of documents in his in-tray, including a summary of the proposals submitted by the exchange.
Does the revelation exonerate Mr Ma? Certainly not. Just ask those company executives who have had to apologise for errors committed by underlings whose names they probably do not know. Yet that is not to say Mr Ma should step down for his blunder. Pulled from the private sector to join the highest echelon of government just two months ago, Mr Ma was, and still is, a political novice whose major error was perhaps to have allowed his instincts to drive him to defend himself.
In the final analysis, the penny stocks crash is an indictment of the level of inexperience and lack of sophistication of key people involved in addressing the issue of ridding the local bourse of hundreds of penny stocks that are easy prey to manipulative trading. It also exposed cracks in the SAR's regulatory framework for its securities and futures industry, with the government, Securities and Futures Commission and HKEx each having a confused mandate.
The penny stocks row might have been less damaging had the entire job of regulating listed firms been put under an independent authority. Under the current setup, with the Listing Committee housed under the HKEx and comprising part-timers, the choice of some of whom has been a bone of contention, a genuine consultation exercise has been turned into a battle. Exchange officials keen to put a cap on penny stocks have become the targets of entrenched interests.
Despite the fuss that it has kicked up, the row should certainly not be seen as a litmus test of the so-called accountability system that Chief Executive Tung Chee-hwa has just introduced. What matters now is for all to learn the lessons and get on with the work of building Hong Kong.