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Enoch Yiu

The Securities and Futures Commission has reported a deficit of $72 million in the year to March 31 - its first financial loss since its establishment in 1989.

 SFC chairman Andrew Sheng admitted in the agency's annual report released yesterday that the deficit was wider than the $44 million forecast earlier.

 However, he said 'the deficit would have been larger had it not been for our stringent expenditure control, which kept actual spending to $373 million, 13 per cent lower than the Budget-approved $430 million'.

 He blamed the deficit on a 54 per cent drop in revenue from a year ago to $300.6 million because of shrinking stock market turnover.

 It was also the result of a reduction of the SFC's share of the stock exchange's transaction levy in the financial year.

 The SFC's portion of the levy was lowered to 0.004 per cent per transaction from 0.006.

 In the year, the stock market's turnover fell 62 per cent from a year earlier. As a result, transaction-levy income shared by the SFC - its top income source - dropped to $134 million from $478 million.

 The 0.011 per cent transaction levy was paid by investors on each transaction, which was 0.004 per cent shared by the SFC and 0.007 per cent by the stock exchange.

 The SFC's accumulated surplus reserve at the end of March stood at $742.81 million, down 23 per cent from a year earlier, the report said.

 The drop was due to the contribution of $150 million from the reserve to the stock exchange compensation fund, it said.

 The contribution was aimed at enlarging the compensation fund in order to make payments to clients of CA Pacific Securities and other brokerages that defaulted early last year.

 In view of the economic downturn, the SFC decided to freeze its fees for the financial year.

 During the year, the SFC received 3,630 inquiries and 441 complaints from investors. It passed 26 cases to the enforcement division for further investigation.

REGULATION 



SFC reports first deficit on falling turnover, lower levy