SFC mulls ways to help bank broking practices

Chief regulator says report on how lenders can improve securities operations will be out soon

PUBLISHED : Thursday, 12 December, 2013, 3:29am
UPDATED : Thursday, 12 December, 2013, 3:29am

The Securities and Futures Commission is looking at ways to improve the conduct of banks' securities departments, with a report due to be issued in the next two to three weeks.

Chief executive Ashley Alder said the report was not part of the SFC's regulatory or supervisory functions but the result of working with large banks that operated securities business to find ways to improve their operations.

"It is aimed at finding the best practices and ways forward," Alder told more than 100 brokers and fund managers at a lunch yesterday. "It is aimed at achieving a better dialogue with industry so as to find ways to improve."

Banks are regulated by the Hong Kong Monetary Authority but those that also operate securities businesses need to follow the SFC's code of conduct to ensure sufficient risk-management and investor-protection measures are in place.

Alder also said the SFC was open minded about indications from Hong Kong Exchanges and Clearing that it intended to consult the market about dual-class share structures to meet the needs of some companies.

"It would be entirely up to the exchange to have a public discussion about the issue," he said.

Such share structures have been the subject of heated debate since October, when the SFC refused to provide a waiver to mainland e-commerce giant Alibaba, which sought to use a structure that would have allowed its 28 partners - mainly founders and senior executives - to name a majority of directors. The SFC said it would violate the one-share, one-vote principle.

Alder said the SFC would soon issue a consultation paper on the regulation of electronic trading systems known as dark pools and might also issue another on relaxing the requirements imposed on real estate investment trusts.

The SFC will also look next year into regulations governing the way asset management companies pay their distributors. Britain has banned some commission payments to distributors while other markets require higher levels of transparency.

Alder also welcomed an announcement last week that the HKEx and Singapore Exchange had signed an agreement to co-operate on the introduction of yuan products and to work together on regulatory issues.

He said some US and European regulation now would extend to Asia and it would be good to have the two exchanges form an alliance that could speak on behalf of Asia.