PUBLISHED : Wednesday, 04 April, 2007, 12:00am
UPDATED : Wednesday, 04 April, 2007, 12:00am

'Mainland to aid SFC probes of wrongdoers'

SCMP headline, April 3

And here is a starting question for our Securities and Futures Commission: Do you people see anything wrong with this headline.

I ask because I have had occasion in the past to think that the SFC jumps too quickly in assuming the immediate guilt of some of the people it nabs. The point here, of course, is that you are meant to be innocent of any wrongdoing until and unless you have been proven guilty of it.

If you have not yet been proven guilty, then you cannot yet be deemed a wrongdoer. If you have been proven guilty, however, then there is no reason why a regulatory agency should bother any longer to conduct probes of your wrongdoings. They were already proven to be wrongdoings and you were already found guilty of them. Why belabour the point in that case?

Why indeed? It is still entirely appropriate to belabour the SFC about this sort of thing. With these people you want to be certain that the point is understood.

Okay, next point then. The news is that the SFC has signed a 'side letter' to a co-operation agreement with the China Securities Regulatory Commission. In the future, the SFC may ask the CSRC for help in investigating Hong Kong securities offences and the CSRC may seek court sanctions against persons who refuse to answer SFC questions.

All well and good but, as I understand it, the SFC always had the right to ask the CSRC for help. The only real change is the CSRC can now compel people in the mainland to divulge information that the SFC would like to have, just as the SFC can compel people to do so in Hong Kong.

This is a pernicious power, by the way. No other law enforcement agency in Hong Kong has the right to compel people to answer its questions.

We otherwise respect the right to remain silent and I am still amazed that the SFC was allowed to knock a breach through our basic civil rights this way. It is certainly no step forward that a regulatory agency in the mainland should copy such practices.

But if it copies them, will it do so for our sakes? Let us remember that the CSRC has no great reason to love Hong Kong. We are the people who steal listings from Shanghai by introducing them here as H shares and we are happy to take every chance to call Shanghai a cowboy market, which it is.

Shanghai, however, is the CSRC's cowboy market. It may be the regulator there rather than the cowboy but don't tell me that the people who run a rodeo have no loyalty to the cowboys who compete in it.

If Shanghai never gets past being a second-rate rodeo as a stock market, then the CSRC will never get past being a second-rate rodeo hollerer as a regulatory agency.

Why should it undermine itself by helping the SFC regulate mainland companies that chose to go to Hong Kong rather than Shanghai? The only reason I can imagine is that it was told to do so by a higher authority and then paid lip service to doing so, as required.

But don't ask me to believe that there was anything more than lip service here until we have a real example of the mainland regulator going out of its way to assist an SFC investigation in the mainland and I mean more than just passing a question along for a routine evasive reply to pass back to the SFC.

It just goes to show once again how very little regulatory control the SFC has over mainland listings. It cannot really investigate them at all. It has no powers in the mainland. If the directors of an offending company stay across the border, they can feed any lie they want to the SFC, and I am sure they do.

It certainly raises a question when I see the official press release state that: 'The SFC wishes to stress that while the side letter will enhance the SFC's ability to gather evidence, there are many other factors that influence successful regulatory outcomes.'

Glad to hear it, fellas, and could you tell me a bit more about these other factors? Just what is it you can do to achieve a 'successful regulatory outcome' in the mainland if the CSRC won't play along with you?

Could you please explain why you people beat the drum so much about having such a wonderful framework of securities regulation in the Hong Kong market when the companies that we do the most to attract to this market are ones that do not hang well on that framework or slide right off it at their first opportunity?


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