SFC hopes through train wait, with rules settled, won't be too long
Deal with CSRC aims to help solve regulatory problems created by cross-border trading
Vital rules for compensating wrongdoing under a scheme to directly link Hong Kong and Shanghai stock markets have been agreed as part of a broad plan to solve regulatory problems created by cross-border trading, Securities and Futures Commission chief Ashley Alder said yesterday.
"These arrangements are groundbreaking and match the regulatory need arising from the connectivity of the Hong Kong and mainland markets," Alder said at a Thomson Reuters summit on how the SFC and its mainland counterpart, the China Securities Regulatory Commission, would work together to address alleged misconduct after the launch of a scheme linking the Hong Kong and Shanghai stock markets.
The scheme, also known as the stock through train scheme, was announced by Beijing in April, with a hoped-for October launch now delayed. Under the plan, investors will be able to conduct cross-border share trading up to a quota of 550 billion yuan (HK$695.1 billion).
Under a memorandum of understanding signed two weeks earlier, Alder said the regulators would respond quickly to each other's requests for information. The agreement will also allow them to work together when daily surveillance and investigations are required, and to jointly handle investor complaints and investor education.
More importantly, he said the MOU would allow the SFC to get the CSRC's help in seeking compensation for international and Hong Kong investors in cases of wrongdoing by mainland companies or individuals. The ability to protect investors by seeking compensation across the border in such cases was a vital defence, he said.
The SFC in recent years sought action by Hong Kong courts to order individuals or companies who have committed insider dealing or other malpractices to compensate investors.
The SFC's executive director of enforcement, Mark Steward, said at the summit that the regulatory cooperation between the SFC and the CSRC would be strengthened substantially under the new MOU.
"At present, Hong Kong is a net importer for the CSRC to give information and provide regulatory assistance for the SFC. This is pretty one way as the CSRC seldom requests information or regulatory assistance from us," Steward said, adding this was because there are many mainland firms listed in Hong Kong and not the other way round.
After the through train is implemented, Steward said the regulators would need to help each other frequently to crack down on border misconduct such as insider dealing, market manipulation and other malpractices.
Alder has expressed hope that the launch of the through train scheme would not be too far away.
"The SFC has completed all regulatory works for the Hong Kong-Shanghai Stock Connect. The scheme will benefit both markets. I hope it would be launched in the not too distant future," he said.
On the eve of the scheme's widely expected launch date on Monday, Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia confirmed the delay, adding that he did not know when it would start. Neither Li nor Alder gave reasons for the delayed launch.
Some brokers speculated Beijing is punishing Hong Kong for the Occupy Central protest movement, while others have blamed the volatility on global markets.
