Plans by controversial property investor Pearl Oriental Holdings to enter the securities broking business have been blocked by the stock exchange ruling council, according to sources close to the exchange. Yesterday's decision by the council to vote down the company's membership application is believed to related to the ongoing Securities and Futures Commission (SFC) investigation into trading in the company's shares. The decision is understood to mark the first time since the exchange was set up in 1986 that the council has rejected a membership application. Sources said Pearl's proposed new operation, Pearl Securities, had earlier been approved by the exchange's membership committee. But in a vote of the 31-member exchange council, the application was blocked after four council members voted against it. According to exchange rules, a membership application is rejected if four or more council members vote against. The rules also state that Pearl Securities cannot submit a fresh application for another six months. One council member said some fellow members had earlier expressed reservations over the application because of the securities watchdog's investigation into Pearl Oriental share trading. Pearl Oriental chairman Wong Kwan hit the headlines in November 1996 when the company bought one of the world's most expensive houses, Skyhigh on the Peak, for $540 million. He was not available to comment on the council's decision. Pearl Oriental shares have risen more than 10-fold since they listed in January 1994 as the company developed a loyal following of domestic retail investors. Last June, the shares attracted attention after a series of 50 per cent swings in single trading days. In an announcement at the time, Pearl Oriental said: 'The company has become aware that the SFC is conducting an investigation into the trading of the shares of the company.' The commission has declined to comment on the investigation. A Pearl Oriental spokesman said the investigation was unrelated to the company's operations. Another council member who is also on the membership committee said the committee had different concerns than the council's. 'The membership committee had to approve Pearl Securities' application since it has met with the capital and management requirements according to exchange rules,' one source said. 'The firm has qualified management to run the business and has sufficient financial resources. The committee had no reason to reject its application. 'Members of the exchange's ruling council may have a wider scope of concern, and I believe the SFC investigation may be one of their worries.' Pearl Oriental's plans to enter securities broking emerged at the end of last year when it bought a broker seat on the exchange. At that time, a seat was worth about $8 million. It had hired experienced securities dealers to run the business and had originally hoped to start in June.