Sheng fires parting shot over curbing of watchdog's powers

PUBLISHED : Wednesday, 14 September, 2005, 12:00am
UPDATED : Wednesday, 14 September, 2005, 12:00am

Outgoing SFC chairman dismisses calls for more scrutiny before being allowed to impose fines on listing rule violators

The Securities and Futures Commission would rather surrender any new powers to fine listing violators than face scrutiny of the penalties, outgoing chairman Andrew Sheng said yesterday.

In his farewell media briefing, Mr Sheng said he would urge the government to accept a decision arrived at by the 15-member SFC advisory committee on Monday that establishing a body to first review the watchdog's decisions as a condition for new fining powers was an unacceptable trade-off.

'The SFC already faces a lot of checks and balances such as the Process Review Panel, the appeals tribunal and judicial reviews. It is not necessary to add more scrutiny,' said Mr Sheng, who steps down at the end of the month.

'If the SFC needs to face more scrutiny in exchange for the new fining power, the commission would prefer to give it up and let the Market Misconduct Tribunal (MMT) alone impose fines on offenders breaching the listing rules.'

The South China Morning Post reported on Monday that the SFC would be able to impose fines up to a certain limit if an internal review body comprising SFC executives and market practitioners is in place to consider its findings. The proposal is seen as a way to help allay the fears of critics who charge that the SFC's fining powers will allow it to be 'judge, jury and executioner'.

The MMT, set up under the new Securities and Futures Ordinance and enacted in April 2003, is chaired by a judge and two independent members.

Mr Sheng said the SFC should still be able to impose small fines - he did not specify the amount - without any scrutiny for minor breaches. The more serious cases could be passed to the MMT. 'This is to enhance regulatory efficiency,' he said.

In a consultation paper in January, the government proposed giving the SFC the power to fine firms and directors breaching listing rules up to $5 million and allow the MMT to levy penalties as high as $8 million.

After consultation, the government decided to lift the fining limit on the MMT but in April a source indicated the government did not want to give the power to the SFC due to opposition from half of respondents. After opposition from the SFC and some legislators, however, the government claimed it still maintained an open mind.

The controversies delayed submission to Legco of a bill enshrining listing rules which is now unlikely to go to legislators until at least next month when Mr Sheng will have made way for his successor, whom the Post reported yesterday would be Martin Wheatley.

In a paper given to legislators in April, the government said one way to prevent the SFC from becoming too powerful would be to follow the British model in which the regulator had fining power but was subject to a regulatory decision committee check.

'It is absolutely not essential and unnecessary to set up a regulatory decision committee to check the new fining power of the commission,' Mr Sheng said yesterday.

'If the public would not like to see SFC be investigator, jury and judge at the same time, we would be willing to pass on all fining power to the MMT.'

Democratic Party economic affairs spokesman Sin Chung-kai concurred with Mr Sheng's view. 'If the SFC is going to impose only a fine up to $2 million, it will be able to handle many minor cases - and much quicker than the MMT,' Mr Sin said.

Mr Sheng yesterday declined to repeat his opposition to the government's controversial proposal to split his role into a non-executive chairman and a chief executive.