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  • Oct 24, 2014
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SFC

The Securities and Futures Commission (SFC) is an independent statutory body set up in 1989 to regulate the city’s securities and futures markets. It works to ensure orderly securities and futures market operations, to protect investors and help promote Hong Kong as an international financial centre and a key financial market in China. It is funded by levies on transactions conducted on the Stock Exchange of Hong Kong and the Hong Kong Futures Exchange, and by licence fees..

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Securities and Futures Commission actions increase but fines get smaller

Regulator issued 50pc more fines last year as average punishment dropped by up to 48pc

PUBLISHED : Tuesday, 21 January, 2014, 3:50pm
UPDATED : Wednesday, 22 January, 2014, 2:52pm

Financial regulators increased fines and prosecutions by nearly 50 per cent last year as the proportion of companies complying with the city's corporate governance code sank to the lowest level since 2006, separate studies showed.

Despite the jump in total so-called enforcement actions to 85 in 2013 from 58 previously, the average size of fine levied on firms fell 48 per cent year-on-year to HK$4.4 million. The average fine levied on individuals dropped 42 per cent to HK$126,000.

The findings come five months after the Department of Justice called for the Securities and Futures Commission to be stripped of its power to prosecute and as the government conducts a review of the city's listing rules, which could lead to an overhaul of shareholder protection regulation.

The independent analysis of enforcements was conducted by law firm Freshfields Bruckhaus Deringer, whose China chairman and partner, Teresa Ko Yuk-yin, is a non-executive director of the SFC.

The lawmaker for brokers, Christopher Cheung Wah-fung, said the figures showed the SFC was serious about keeping its enforcement role in maintaining market integrity.

"However, the SFC should not do prosecutions as it means it is combining the role of investigator and judge in one," Cheung told the South China Morning Post. He said he expected the SFC to make even more enforcement actions in 2014 as public debate about its role intensified.

The Post learned in November that the government-appointed Financial Services Development Council had begun a review of the city's listing rules.

The review was ordered as the city's financial industry considers how it should seek to retain its global competitiveness after Hong Kong Exchanges and Clearing lost its bid to land Alibaba's potential US$15 billion initial public offering last year.

Government sources insist the review is not linked to the Alibaba issue, but many industry insiders believe otherwise and see the rise in the level of enforcements as a way in which the SFC can signal it would remain tough on shareholder protection even if listing rules changed.

Meanwhile, accounting firm BDO revealed that the proportion of Hong Kong-listed companies complying with the city's corporate governance code had slumped to its lowest level since its 2006 launch.

The report showed the full compliance ratio for Hang Seng Index companies dropped to 42 per cent last year, while that for Hang Seng Composite Index companies dropped to 37 per cent, down from over 50 per cent consistently in the years between 2006 and 2012.

The ratio for H-share companies was 67 per cent last year. It had ranged between 50 per cent and 86 per cent during the same period.

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