Securities and Futures Commission runs up deficit
Lower income from a levy on investors eats into watchdog's income, dashing hopes of a cut in the percentage to be paid on share transactions
Poor market sentiment has hit not only the earnings of listed firms, especially those in the financial sector, it has also hammered their regulator, costing stock investors the break on fees some had hoped for.
The Securities and Futures Commission (SFC) has run up a deficit in recent months and expects worse in this quarter, according to people close to the watchdog.
The SFC has been in the red in the past few months because lower market turnover has cut income from a levy investors pay on share transactions, a person familiar with the situation said. The charge, 0.003 per cent of the value of the transaction, is a major source of the commission's funds.
Average daily turnover on the Hong Kong stock exchange in the first nine months was HK$53.14 billion, down 27 per cent on the same period last year.
The situation is set to worsen this quarter because the commission's rent is expected to soar after it moves to the Cheung Kong Center from Li Po Chun Chambers and Charter House. The SFC expects rental expenses to double to HK$200 million for the financial year to the end of March next year.
"Under these circumstances, the SFC board has recently concluded that it would not propose to waive or scrap the transaction levy paid by investors in the next financial year to the end of March 2014," the person said.