Lawmaker says watchdog too kind on HKMEx
SFC would be tougher on failed brokers than it was with collapsed exchange, says Albert Ho
Lawmakers accused officials at the Securities and Futures Commission yesterday of adopting a too lenient approach to the ill-fated Hong Kong Mercantile Exchange (HKMEx), which they alleged was given privileged treatment because of the strong relationship between its founder and the government.
The SFC's chief executive, Ashley Alder, was questioned about last month's collapse of the HKMEx when he attended the regular monthly meeting of the Legco financial affairs panel. The exchange, which traded gold and silver contracts, was founded and chaired by former Executive Council member Barry Cheung Chun-yuen, a key adviser to Chief Executive Leung Chun-ying.
Legislator Albert Ho Chun-yan was critical of the commission for not stopping the HKMEx from trading after it noted the exchange's thin trading volume more than a year ago.
The two-year-old exchange failed to generate sufficient income and handed back its licence to the SFC last month. A few days later, the SFC alerted the police commercial crime bureau to suspected serious financial irregularities at the HKMEx. Police subsequently arrested six people and charged three. Cheung has also resigned from all his public duties.
Ho said: "While it appears the HKMEx had difficulties paying its rent and other normal operational expenses a year ago, the commission did not shut [the exchange's] doors."
He said the SFC would have used harder measures against brokers with financial problems, but adopted a lenient approach to the HKMEx by allowing it to hand back its licence voluntarily.
"The SFC has adopted a double standard and it has been too kind to the HKMEx. We have to ask if such a privileged approach was due to its founder, Barry Cheung, being an influential person in society," Ho said.
Alder rejected the allegations and said it was the SFC's decision to withdraw the HKMEx's licence when the exchange could not show it had sufficient funds to meet its financial requirements. After the SFC's decision to withdraw the licence, "the HKMEx had no choice but to hand the licence back", Alder said.
Christopher Cheung Wah-fung, a legislator for the financial services sector, asked why the SFC allowed the HKMEx to still recruit new members even when it had financial problems.
Cheung said the situation was just like a beauty salon that continued to sell coupons for facials even when it knew it was going to close down.
"Each member of the HKMEx needed to pay US$20,000 and they are suffering a loss," Cheung said.