Lawmakers question SFC's hiring spree

Cash-rich securities regulator's plan prompts Legco members to ask if it really needs the extra staff or if it just has too much money to spend

PUBLISHED : Saturday, 08 February, 2014, 5:12am
UPDATED : Saturday, 08 February, 2014, 5:12am

Lawmakers have queried whether the Securities and Futures Commission's plan to hire 51 extra staff this year was prompted by the need to reduce its hoard of cash, and expressed concerns that the expansion plan could lead to over-regulation of the market.

"The SFC is adding scores of staff every year and this year it is adding another 51," said legislator Starry Lee Wai-king, who chaired a financial affairs panel meeting yesterday. "There are not many organisations that could expand their headcount at the same speed. We have to worry if the SFC is hiring more just because it has too much money to spend."

Legislators have criticised the SFC's high reserves, which are expected to hit HK$7.15 billion by the end of next month - enough to fund its operations for five years.

The SFC has plans to reduce its income. From October, it will cut the 0.003 per cent transaction levy to 0.0027 per cent - a move that will save investors HK$52.38 million a year. By law, it needs to consider cutting the levy when its reserves are sufficient for two years of operation.

It will also waive a further two fiscal years of licensing fees, up to March 2016. This will save brokers, fund managers and financial advisers a combined HK$340 million. The commission will also spend HK$20 million to help train financial professionals.

But Democratic Party legislator James To Kun-sun said the SFC had not gone far enough. "The SFC has too much money on hand, which is not necessary as it is a regulator," he said. "It should cut the levy further."

Legislator Christopher Cheung Wah-fung, who represents the financial services sector, worried that the SFC hiring spree might lead to over-regulation of the market.

"When the SFC is hiring more people to do more investigation, this would lead to many brokers and listed companies having to pay more in compliance costs," he said. "We hope the SFC will strike a balance and not do an excessive number of investigations."

A study by law firm Freshfields Bruckhaus Deringer showed that the number of SFC enforcement actions last year was up almost 50 per cent on the previous year.

SFC chairman Carlson Tong Ka-shing told the lawmakers that the hiring - which will take the SFC's total staff to 845 - was needed for the commission to carry out its duties.

"The commission would not hire people just because we have too much money on hand," Tong said, adding the high reserves were due to high levies collected during the market bull run between 2006 and 2008.

Since then, the SFC has cut the levy rate twice. He said the commission must ensure it has a stable income and not let its operating deficit balloon, or it will be "financially irresponsible".

SFC chief executive Ashley Alder told the panel it needed the extra staff to speed up investigations. It has also set up a new team to investigate listed companies because it wanted to detect misconduct at an early stage.

There would be a new team to regulate Hong Kong Exchanges and Clearing because the bourse had a more complex business model after its acquisition of the London Metal Exchange.