SCHRODERS Asia's appointment as the financial adviser to minority shareholders in the proposed Wharf (Holdings) privatisation of hotel group Harbour Centre requires some impartial review. Some industry practitioners describe it as an outrageous break with the first principles of providing independent financial advice. The reason for this fit of indignation among local industry practitioners is that Schroders is 20 per cent-owned by the Kadoorie family. The same family controls 55 per cent of the Hongkong and Shanghai Hotel Group, which in turn owns 10.72 per cent of Harbour Centre. This makes Hongkong and Shanghai Hotel Group a deeply interested party in the transaction. It is not being suggested for a moment that Schroders is unable to give independent financial advice. Schroders' representatives argue that Schroders is quite able, efficiently and effectively, to deliver professional financial advice of the highest quality to minorities. This is especially so, given that Hongkong and Shanghai Hotel Group could be termedas a minority investor itself. Those who question the appointment of Schroders to this transaction accept this view. However, they argue that the appointment does raise questions, such as the possibility of conflict of interest. This is especially important in this case, given that 90 per cent approval by minorities is needed in privatisations, under schemes of arrangement. This means that the hotel group's stake is critical to the success or failure of the privatisation. Hongkong and Shanghai Hotel Group linked with Wharf over the Harbour Centre Development in 1968. On listing Harbour Centre in 1971, the hotel group owned 7.5 per cent of Harbour Centre and had the management contracts to key hotels in the group. There was a two-week court dispute between Wharf and Hongkong and Shanghai Hotel Group in 1985 over the hotel firm's plans to build the Kowloon Hotel, after which Wharf took management control of the Harbour Centre Hotels. In another case, Seapower Corporate Finance was turned down by the Securities and Futures Commission as the financial adviser in a planned takeover of Success Holdings because there were common directorships in the deal. Under the transaction, it was proposed that Seapower, led by former Hongkong Stock Exchange chief executive Francis Yuen, should act as the adviser to minorities at Success. Seapower was turned down because Mr Yuen sat on the same company board as Peregrine Capital managing director Francis Leung. The company was called Tien Fung Investments, which holds 19.8 per cent of Seapower. Peregrine was advising Walsin - the takeoverbidder. In this case, an SFC panel governing takeovers and mergers ruled that: ''Minority investors could reasonably perceive a lack of independence on the part of Seapower.'' A lot more questions need to be asked about Schroders involvement in the Harbour Centre privatisation to ensure that all possible doubts surrounding the appointment are cleared up. The independence of the financial adviser to minorities in the deal must be indisputable.