The Government's drive to crack down on unregulated areas of the investment industry is now targeting gold traders, according to sources.
Officials were seeking ways to tighten the regulation of gold companies in response to an increasing number of complaints from investors, the sources said.
The move forms part of plans by the Government to eradicate unregulated parts of the financial services industry following the collapse of several local brokerages linked to unregulated margin finance companies.
It is understood government officials are in contact with the Chinese Gold and Silver Society - the only bullion exchange in Hong Kong - to seek ways to regulate small local traders who are not members of the society.
Gold worth about US$190 million is traded daily in Hong Kong, mainly by international bullion investors, banks and regulated gold trading companies.
There are, however, some small bullion trading companies that are not members of the Chinese Gold and Silver Exchange Society and that are not part of any banking group.
There is no legislation covering bullion trading in Hong Kong and dealers are not required to register with the Securities and Futures Commission (SFC) or any other financial regulator.
Former provisional legislator Chan Choi-hi urged the Government to bring bullion traders under the regulatory control of the SFC as there had been an increasing number of complaints over the past two years.
According to government statistics, there were nine complaints in 1996, involving claims of about $21 million, while last year there were 129 complaints with a total of $35.64 million involved.
A source at the Chinese Gold and Silver Exchange Society said it backed the Government's drive to tighten control over the industry, urging it to take action in accordance with the Commodities Ordinance.