SFC expects HK$435m deficit in new year

Lower fee income and higher staff costs blamed for second consecutive budget in the red but legislators say the market watchdog is too rich

PUBLISHED : Tuesday, 05 February, 2013, 12:00am
UPDATED : Tuesday, 05 February, 2013, 5:26am

The Securities and Futures Commission anticipates a deficit of more than HK$400 million for the next financial year but lawmakers still believe the regulator is "too rich" and has urged it to stop charging investors.

At its regular monthly meeting yesterday, lawmakers of the financial affairs panel passed a non-binding motion to call on the regulator to slash or suspend its levy on investors.

The SFC is a regulator and does not need such reserves ... We think it is rich enough to stop charging investors for some time


The levy, at 0.003 per cent of the value of every share transaction, is one of the SFC's major sources of revenue.

"The law requires the SFC to consider cutting or suspending the levy when its reserves are sufficient to cover expenses for two years. Currently, the SFC's reserves stand at HK$7.24 billion, sufficient for more than five years," said Christopher Cheung Wah-fung, the legislator for the financial services sector.

"The SFC is a regulator and does not need such reserves.

"We think it is rich enough to stop charging investors for some time.

"The amount may not be huge but it is the right thing for the SFC to do to help investors."

The motion being non-binding, the SFC does not need to follow it.

SFC chairman Carlson Tong Ka-shing rejected the call, saying it would not cut the levy as the SFC needed to maintain its reserves in the event of market volatility.

In its budget for the next financial year, the SFC is expected to post a deficit of HK$435.16 million because of lower fee income and rising staff costs.

If that projection is correct, it will be the second consecutive year that the regulator will be in the red. It expects to record a deficit of HK$232.13 million for this financial year to March because of lower market turnover last year.

Cheung, however, said the stock market turnover had rebounded on the heels of monetary easing by governments worldwide, providing liquidity for investments.

Last month, the Hang Seng Index rose 4.7 per cent, with turnover on some days reaching HK$70 billion. The average daily turnover last year was HK$53.85 billion.

Tong said the SFC in April last year waived the licence fees of brokers, fund managers and financial advisers for two years, which would reduce its revenue by HK$332.4 million.

In addition, staff costs would increase as the regulator planned to add 47 full-time enforcement posts in the new financial year.

Tong said the SFC would weigh the best use of its reserves for investor education.

The regulator, however, is unlikely to buy its own property in the near term as it has just started a five-year lease at Cheung Kong Center.