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Jake Van Der Kamp

Lawmakers have approved controversial legislation requiring Hong Kong listed companies and their senior executives to disclose price-sensitive information in a timely manner or face a fine of up to HK$8 million.
SCMP, April 26
Let me share with you a little snippet from the most recent accounts of the Securities and Futures Commission. Did you know that in its last financial year the SFC had a wage bill of HK$564 million for 544 employees?
Yes indeed, here we have the first employer in Hong Kong to pay its staff more than HK$1 million a year each on average. Go ahead, give me the name of any company that takes such tender loving care of its people. This is certainly a landmark achievement.
It also confirms the first principle in these matters - when regulators set out to do good, they do very well indeed.
But not to worry that you are paying the bill. The SFC pays for itself through a stock exchange tax called the transaction levy. It is investors who pay. And now our stock exchange is worried that alternative forms of securities trading are undercutting its business. I wonder why.
The SFC need not worry that it will run out of money, however. The transaction levy has allowed it to save up about seven (or is eight?) years' worth of costs at wages of a million Hong Kong dollars a year per employee and it now wants to use the money to get into the property investment business, which is, of course, a natural line of work for a regulator.
But I really shouldn't object too much to that million dollars a year per employee. If you pay peanuts, you get monkeys, you know, and we can't have monkeys in the SFC, quite the opposite. Its standard for new hires is third-rate Australian lawyers who can't find jobs in private practice and have no experience of investment.
We need such brainy people in the job as they must have a precise and faultless understanding of the word 'reasonable'. This has become all the more important now that the SFC can sting company directors for HK$8 million a pop if they do not disclose what they ought to disclose to the investing public about their operations.
How must they disclose it?
Simple. They must send a notice to the stock exchange, which no one will read as there just isn't enough time in the day to read all these notices and as any truly hot stuff will have leaked out to the rumour mill long before and be old news by the time it is formally announced.
What ought they to disclose?
Easy. They must reveal price-sensitive information, everything that could have an impact on the share price, well, sort of, if it's not within a range of exemptions.
And how will they know what is price-sensitive information in each instance?
Oh, stop being so pedantic, will you? Be reasonable. What would a third-rate lawyer, fresh off the plane from Sydney and with no experience of investment, think might be reasonable in investment in the Hong Kong context? That's what price-sensitive information means.
But we won't tolerate any misunderstandings here. Get it wrong and you could be poorer by HK$8 million plus your lawyer's fees and SFC costs.
Let us be grateful at least that our legislators saw enough sense to tell the SFC to go away when it first tried to make this contrived offence a criminal one. The SFC wanted the power to send you to prison if you didn't think as its people think about investment matters. I wish I knew why these regulators have such a passion for jail sentences.
I can understand, however, why they also have a passion for empire-building, and they do have this passion. They are in the process of writing another law to send new- issue sponsors to jail if they make fraudulent claims about the companies they sponsor.
We already have perfectly good laws against fraud and these could serve the purpose perfectly well. The only problem is that they let the police fraud squad in on what the SFC would like to claim as its own territory and the SFC has therefore decided to write its own law.
Doing things this way, you see, will allow the SFC to bring more people in to the delights of pay at an average of more than HK$1 million a year across an entire establishment. How very considerate, how heart-warming.



What the SFC's new disclosure law discloses about the SFC