SFC to tighten check for misconduct

PUBLISHED : Saturday, 25 January, 2014, 5:29am
UPDATED : Saturday, 25 January, 2014, 5:29am

Listed companies, which see auditors jump ship or the departure of several directors, will come under closer scrutiny this year as the Securities and Futures Commission focuses on its new role as a corporate regulator, says chairman Carlson Tong Ka-shing.

"A new team has been set up to check on corporate announcements and transactions to check for any early signal of misconduct," he told regional regulators and financial professionals at the annual SFC Forum yesterday.

Tong, who said last month the commission would step up efforts to crack down on corporate misconduct, and SFC executive director Brian Ho Yin-tung yesterday disclosed more details of how the regulator would do so.

Ho said the team would focus on checking company announcements about their financial statements, transactions and changes of directors or auditors to identify potential misconduct and be able to take action at an early stage.

Companies with frequent transactions and changes in directors or auditors would be put on a watch list.

Ho also said the commission would consult market participants soon to seek ways to encourage more shareholder engagement.

Fund managers and retail investors would also be urged to take a more active role in monitoring company management to make sure they operated in ways that benefited shareholders.

Hong Kong Institute of Directors chairman Kelvin Wong Tin-yau said the new SFC initiatives would add to pressure on independent directors, who would need to pay attention to information supplied by the company's management and check its accuracy.

"This would add to the workload of directors," Wong said. "As I always say, the companies should pay a reasonable remuneration to attract quality people to be their independent directors to check on such corporate governance issues."

SFC deputy chief executive Alexa Lam Cheung told the forum another focus of the commission this year would be to implement the scheme to allow the cross-selling of funds with the mainland.

Lam said Hong Kong and the mainland would soon sign a mutual recognition agreement, under which Hong Kong-domiciled funds could be sold on the mainland and mainland funds sold in Hong Kong

She rejected rumours that a similar arrangement would be put in place in Britain soon.

"Beijing has confirmed to the SFC that the mutual recognition scheme is exclusive for Hong Kong initially," she said. "There will be no discussion of a similar arrangement with any other countries soon."