Regulator to lose HK$332m in waiver
The cashed-up securities regulator is proposing accepting a forecast HK$332.4 million in lost income and investment gains by waiving licence fees for the investment community for the next two years starting from April.
The estimate for the waiver was included in a revised budget that the Securities and Futures Commission yesterday submitted to the Legislative Council.
'The SFC is mindful that market participants have been operating in a stressed environment amid high levels of volatility, uncertainty in the global economy and sluggish turnover over the past few months,' the commission said about its decision to institute the waiver.
Last month, lawmakers rejected the SFC's first budget submission, criticising it for refusing to cut the 0.003 per cent levy on stock trades despite its massive cash reserves of HK$7.4 billion.
The HK$7.4 billion cash pile is sufficient to fund the SFC's operations for seven years.
Legally, the regulator is required to consider a levy cut when reserves can support two years of operation. The SFC is, however, standing firm against cutting the trading levy as it is planning to buy its own office in the redeveloped west wing of the government offices in Central, say people with knowledge of the matter.
'The option of acquiring an office would result in an annual saving of roughly HK$180 million in rental expenses,'' the SFC yesterday said in a statement posted on Legco's website.
'If in future the SFC were to proceed with this option, this in itself is likely to be sufficient justification to adjust its overall funding model.'
The SFC's rental expenses this year will double to more than HK$200 million after its relocation to to Cheung Kong Centre from Li Po Chung Chambers and Chater House.
Under the waiver, its licence fee income is expected to fall by HK$92 million in 2012/2013, HK$165 million in 2013-2014, and HK74 million in 2014-2015. That would lead to a reduction of investment income of about HK$2.4 million over two years.
As a result of the waiver, the SFC's surplus in the upcoming financial year is expected to fall to HK$145.2 million, from HK$237 million.
The regulator expects its cash reserves to drop to HK$7.56 billion at the end of March next year, which would be equivalent to 5.6 years of its 2012-2013 operating expenses.
Lawmakers will debate the revised budget this morning.
