Legislators on Monday cast doubts on the securities regulator’s decision to allow the Hong Kong Mercantile Exchange to surrender its licence, instead of immediately suspending it, after it emerged that the firm had insufficient capital.
The HKMEx, a commodity trader, chaired by Executive Councillor Barry Cheung Chun-yuen, last week handed back its trading licence and suspended operations after it became clear it could no longer meet the requirement that it have sufficient cash to cover nine months of operations.
The decision by the Hong Kong Securities and Futures Commission to allow such an arrangement has raised concern among legislators.
Christopher Cheung Wah-fung, legislator for the financial services sector, said on Monday the SFC’s handling of HKMEx’s case was unusually lenient.
Cheung said insufficient cash was a serious problem that usually led to immediate licence suspension.
“If this happened with brokers, I believe the SFC would take very serious actions,” Christopher Cheung said.
Another lawmaker, Democratic Party’s Albert Ho Chun-yan asked if Cheung had been given preferential treatment because of his role as a key aide to Chief Executive Leung Chun-ying.
“If this were the case, this would undermine Hong Kong’s image as a financial hub and its rule of law,” Ho said.
Barry Cheung, who has said that any outstanding contracts would be honoured, would not comment further on the issue when approached on way to his office at Cyperport on Monday morning.
Barry Cheung chaired the 2012 chief executive election campaign for Leung Chun-ying. In addition to being a non-official member of the Executive Council, he is deputy head of the government-appointed Commission on Strategic Development and has many other public duties.
Last month, the government broke a long-standing convention on the duration a person can hold the same public service post when it extended Barry Cheung’s tenure as Urban Renewal Authority chairman for two years.
The Hong Kong Mercantile Exchange said on Saturday it would go ahead with a planned US$100 million rights issue and be ready within months to reapply for the trading licence it handed back to regulators at the weekend.
A SFC source on Monday said brokers and the HKMEx are run differently and that the SFC needed to have tighter requirements on brokers as they handled clients money and stocks, but the exchange did not and only executed trades.
Additional reporting Enoch Yiu.