Franklin Lam Fan-keung yesterday took leave of absence from the Executive Council amid suspicion that he used inside information to boost his profits from the sale of two flats.
Hours before the announcement, Chief Secretary Carrie Lam Cheng Yuet-ngor had come out in defence of Lam, dismissing calls for his resignation because the matter "did not involve a conflict of interest".
Franklin Lam is only the second Exco member to take leave of absence since the handover.
Henry Fan Hung-ling, former managing director of Citic Pacific, took leave in 2008 after the company delayed for six weeks an announcement about massive losses on foreign exchange dealings. Fan left Exco the following year in a reshuffle.
Franklin Lam, who had not responded to media inquiries for three days, issued a statement via e-mail yesterday. He said Chief Executive Leung Chun-ying accepted his leave request, which he submitted on Friday.
The leave would last "until further notice", he said.
He would not attend Exco meetings during his leave, a government statement said, and the council would also stop sending him relevant documents.
Leung said he approved the request because Lam needed time to handle the queries over his property sales.
"Exco has a stringent system of confidentiality," Leung said. "There is no way Lam could have known in advance the measures on stamp duties."
Lam, a property analyst and investor appointed to Exco in July, sold two flats in Mid-Levels and made a profit of about HK$10 million. The two Casa Bella properties changed hands less than six weeks before the government introduced a buyers' stamp duty to bring down prices.
Lam denies having had insider knowledge of the curbs, but the pressure on him rose after he changed his story about an alleged offer of "extra commission" to a property agent.
The Independent Commission Against Corruption is understood to have launched an investigation. Commissioner Simon Peh Yun-lu declined to comment yesterday, saying only that membership of Exco would not hinder the ICAC's inquiries.
A barrister who worked for the ICAC for 28 years told the South China Morning Post Lam might have breached anti-bribery laws if he had indeed offered the agent extra commission.
Democratic Party lawmaker James To Kun-sun said Lam had made "a wise decision" in taking leave, as the graft-buster could request interviews with him at any time. Alan Leong Kah-kit, leader of the Civic Party, described Lam's leave-taking as "a compromise arrangement".
He said government leaders were finding it harder to defend Lam, especially since the ICAC had opened a file on him.
"C Y does not want to lose face by asking Lam to resign immediately," Leong said. "But how long will the leave be? A long absence would make the public doubt if his appointment serves any real purpose in the first place."
Lam is understood to have been asked to join Exco because of the advice he could offer on property and housing policies.
Carrie Lam was the first senior official to say he did not need to resign. She said that "at the moment, I cannot see any conflict of interest" between Franklin Lam's property transactions and his Exco membership.
She added: "I believe he will continue to clarify the details of the transactions." Her view was echoed by Exco convenor Lam Woon-kwong and Beijing loyalist Rita Fan Hsu Lai-tai.