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SFC overhaul must not slow market reform

The recent appointment of Martin Wheatley as chairman of the Securities and Futures Commission has brought a difficult recruitment exercise to a close. That Andrew Sheng's successor hails from the United Kingdom reflects in part the limited pool of suitable candidates in Hong Kong and a pervading reluctance to take on such a hot seat in a small town. Yet overseas experience brings obvious advantages and Mr Wheatley is a seasoned regulator, having worked at the London Stock Exchange for 18 years, most recently as deputy chief executive.

This is, however, not likely to be a simple changing of the guard, rather a pre-cursor to a more radical overhaul of SFC governance. Mr Wheatley's lack of local experience is widely expected to be offset by the appointment of an establishment figure to share the task of running the financial watchdog.

A proposal by the government to split the role of the SFC chairman has recently taken on an increasing air of inevitability in the market, with current Hong Kong Exchanges and Clearing chairman Charles Lee Yeh-kwong tipped to share the post with Mr Wheatley. The government's case - still to be ratified by legislators - is that dividing the role will boost the SFC's independence and accountability.

The idea was initially flagged under a broad umbrella: a quest for good governance and a desire to be seen internationally as an advocate of best practice. Few would argue with this general sentiment. As to the actual splitting of the role, critics of the regulator and how it wields potent powers have been fast to grasp a chance to install further checks and balances.

What is lacking, however, is an overwhelming case as to why the SFC needs such an overhaul at the top at this particular juncture, and why the same scrutiny of governance is not being applied to other regulators such as the Hong Kong Monetary Authority or the insurance watchdog. The fear among sceptics is that political motives are at play, the government seeking to dilute the SFC's autonomy and exert more control over its modus operandi and strategy.

The job description of the proposed 'non-executive chairman' post has fuelled these concerns, the slot having a token air because of its part-time nature and negligible salary. Even the hardiest supporters in the market are loath to see it simply become a political appointment. The risk of damage to both the SFC's perceived and real independence would be paramount.

Most importantly, it is crucial that any top-tier remodelling at the SFC should not stifle the pace of market reform. As a fund-raising centre for mainland enterprises, Hong Kong needs to constantly raise the bar as the challenges of cross-border regulation grow. It is here more than anywhere that its reputation is on the line.

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