Rising sharemarket turnover generated a $61 million surplus for the Securities and Futures Commission (SFC) in the year to March - its highest annual surplus and six times the figure recorded for 1995-96. The watchdog's 1996-97 annual report stated the latest surplus compared with $10 million in the previous year and took the SFC's accumulated reserves to $644.88 million at the end of March, up from $592 million a year earlier. The reserves figure was almost double the SFC's estimated operating expenditure of $339 million for this year. The surplus increase was due mainly to a jump in income earned from the levy imposed on share transactions during a year in which monthly turnover ranged from roughly $60 billion in June last year to almost $250 billion in January. Levy income reached $217 million, up from $134 million previously. Income from the 0.013 per cent levy was shared between the SFC with 0.006 per cent and the stock exchange with 0.007 per cent. The high surplus and reserves were likely to pressure the SFC to reduce the transaction levy - a move the Government has asked the SFC and stock exchange to consider. The SFC is expected to respond to the Government's call at the end of July. Despite the record surplus, the report revealed the SFC was seeking a 7 per cent increase in fees and charges for registered dealers and other licensees effective from this August. The SFC said the increase to recover projected costs, was in line with inflation, and would be the first increase since 1994-95. The report stated that the SFC was working with the Hong Kong and Chinese Government to ensure the H-shares dispute resolution mechanism continues to be fully available to investors after the handover. The report indicated that the existing H-share arbitration system was based on a pre-handover legal framework where investors could choose to settle the dispute in arbitration centres either in Hong Kong or China. Chairman Anthony Neoh said the framework would not be applicable after July 1 and was an area the SFC was looking into. The report revealed two more insider dealing cases had been handed to the Financial Secretary and were waiting referral to the insider trading tribunal. It said the SFC had carried out 323 routine inspections this year compared to 157 in the previous year. Of 1,653 investors complaints and inquiries, 19 cases were formally investigated. The enforcement division handled 376 cases and had completed 207. During the year there were 58 registered persons involved in rat trading and 57 were prosecuted for short selling. The SFC made 901 requests to overseas regulators during the year for licensing information and 14 requests for enforcement-related information. It received 253 licensing requests from overseas regulators and 14 requests for investigatory assistance. Mergers and acquisition activity increased last year as the corporate finance division considered 612 applications compared with 338 in the previous year. The report showed a 6.5 per cent increase in registered persons, which stood at 17,154. The SFC handled 4,940 new applications in the year.