Jake's View | SFC not so good at practising what it preaches
Judging from its income deficit, the regulator fails to manage its own financial affairs
A war of words has broken out between the Securities and Futures Commission and the Department of Justice over the handling of market manipulation cases.
Let's start this one out from a financial angle, as finance is what the SFC is meant to regulate and as this regulator is, sadly, not quite as good at managing its own financial affairs as it is at preaching to others about theirs.
The SFC has built up HK$7.5 billion from this levy … And it is spending it like water
The SFC funds itself from a stock exchange levy of 0.003 per cent on both sides of every transaction except for what market makers toss back and forth to each other. This may not seem like much, but with annual market turnover at almost HK$15 trillion, the levy will bring in about HK$1 billion this year.
The SFC has built up a miser's hoard of HK$7.5 billion from this levy. It is rolling in money and it is spending it like water.
It has increased its staff numbers by more than 50 per cent to 678 people over the past five years and it pays them each an average of HK$1.17 million a year. I repeat. This is the average pay. Find me any other employer of almost 700 people who pays an average of more than HK$1 million a year.
It also now keeps its landlord very happy. It has moved to the swankiest office block in town, Cheung Kong Center, with the result that its rent bill in the latest financial year more than doubled to HK$167 million plus an additional HK$48 million for rates, management fees and other premises costs.
The result of all this high living is that the SFC can no longer balance its incomings and outgoings despite the torrent of cash coming in from the stock exchange levy. Its latest annual accounts show an income deficit of HK$14 million.