Call for higher standards timely
WHILE Hong Kong has been busy polishing its image and congratulating itself on its first conviction in an insider dealer case, financial abuses of another kind have been moving along at speed.
Recent calls by Hong Kong financial advisers to introduce and enforce industry regulations highlight a serious lack of protection for investors.
The concerns in the industry about the deficient standards are grave.
In an advanced economy, a system which allows just about anyone with enough money to invest in a brass plate to declare himself a financial adviser must be wrong.
As Hong Kong matures ever more into a middle class society, planned saving will increase. It is simply not tenable to allow investment recommendations to be based on the amount of commission paid to the adviser, rather than the amount of returns the investor can expect.
Reputable advisers lay the blame for the spread of unacceptably low standards with the Securities and Futures Commission (SFC).
While not rejecting their claims outright, the SFC insists that new regulations would only be considered if an obvious need was demonstrated.
The widely differing views of the practitioners and their regulatory body shows the extent of the communication breakdown.
In part, this gap can be explained by grey areas in the regulations which set down where the SFC's responsibility begins and ends, particularly on insurance-linked investment products.
The first step to correcting the situation must surely involve a meeting of financial advisers and representatives from the SFC. This would give both sides the much needed opportunity to exchange views.
Advisers concerned for the reputation of their industry in Hong Kong are eager to point to the stringent regulations and the industry groups that exist in markets such as Britain and Australia.
While rightly calling for the SFC to take a closer look at their claims, there is also room for financial advisers to act. As a starting point, they could begin by forming an industry group.
Obviously there will be divisions and boycotts by those who are profiting under the current system but, as a collective force, advisers' calls for change would be louder.