Council proposals won't do much for investor protection
Hong Kong's Financial Services Development Council proposed yesterday the creation of several new listing boards, including one specialising in companies with unique shareholding structures...
South China Morning Post, June 19
Struggle your way through the consulta-babble in which this report is written and you find that these new boards would be just another way of allowing in companies like Alibaba whose directors want a listing but don't want to put their own skin in the game.
We have already said no to this idea, and said it resoundingly. If you want to dive for the bottom, go to Singapore. They don't have much in the way of scruples down there. We do. We may not practise one person, one vote in politics but we stick to one share, one vote in the market.
And yet here, trying it on again, we have this odd financial advisory council that the chief executive, an estate agent by trade, appointed on his own mandate without much reference to the financial world, and which has since done little but put out a stream of self-serving position papers.
Hey, fellas, listen up. We said no. Do you live on another planet or something?
Yes, it is true that London and New York allow some big swingers in technology to have absolute control over companies in which they hold only a small fraction of the share capital.
It doesn't say much for the standards of those two cities either but at least they offer investor protections that we do not have. In New York, for instance, cheated shareholders can sue via class action paid for in contingency fees.
These are union-busting advances which our own Amalgamated Brotherhood of Law and Allied Workers staunchly resist as a potential threat to fee income. Hong Kong lawyers are determined not to emerge from the 17th century.
We must therefore rely more heavily on the Small Fry Commission (SFC), otherwise referred to as the Securities and Futures Commission but chiefly characterised by its love of fishing for small fry stockbrokers and blaming others when things go wrong for small fry investors.
When these regulators were challenged recently to discipline the MTR Corporation for not reporting price-sensitive information to the stock exchange, as required by a law they loudly cheered, all was silence. Strange, that.
Let's also remember that the SFC's writ does not extend over the border although most of our market's capitalisation now consists of mainland stocks.
In short, investors here have very little protection anyway from the sharks of the market. Are we then to turn them into pure shark bait by removing the one protection they have that sharks who take big bites of them must also bite themselves?
This latest advisory council study features a few other howlers. In the executive summary it states: "... we encourage the market regulators to be proactive and flexible in their administrative practices, so that the market will see ... improvements in key aspects that do not require consultation or law or rule making processes, or where such processes may be expedited."
Pardon the confused phrasing. It's not mine. But what the authors of this report could have discovered by talking to the stock exchange is that any rule change it makes requires a consultation. There can be no expediting.
They didn't talk to the stock exchange. They haven't talked to anyone much. Their wisdom is sufficient to itself, you see.
And then we have them calling for scripless trading. Lovely idea. It will bring the Hong Kong market into the modern world.
One problem, however. The stock exchange has already been trying it for years and the local Hong Kong investor refuses. He wants the feel of that share certificate inside his mattress. He doesn't trust a stranger's promise delivered over a digital communications node.
Talk to a few of them, fellas, and you would know.
This council should have followed the advice I offered when it was formed - swan around the world, eat fancy, live high, fly first class and then return and recommend the reforms already in process; mission accomplished.
But, aw shucks, they wouldn't listen to me.