Taiwan-based brokerage KGI Asia plans to introduce a wide range of soft rebates to on-line clients, despite a warning last month by the Securities and Futures Commission that such schemes could be illegal. Under the programme, KGI clients who trade stocks through the company's Web site can accumulate points, according to the amount of commission paid on each transaction. These points can be used to redeem commodities from the company's partners, among them IBM, Cathay Holidays, ParknShop and Fundsmart. The SFC last month warned that such schemes might engage in unregistered dealing in breach of the securities ordinance. It noted that the term 'dealing in securities' in the ordinance had been defined to include 'inducing or attempting to induce' anyone to enter securities trading. Therefore, business partners who provided soft rebates might be regarded as unregistered dealers because they did not register with the SFC, analysts said. Local brokers, such as South China and Bright Smart, said they had scrapped similar incentive schemes when the SFC had repeated its warning. 'We have consulted experts to make sure the scheme is compliant with the law,' KGI director Simon Nip said. Under the scheme, the firm's 12,000 existing clients would have to switch to on-line trading to join the programme, KGI director Anthony Yung Tin-sik said. The on-line system cost the firm about $30 million in hardware. Mr Yung said he did not expect many clients would switch to on-line trading in the foreseeable future since local investors still traded in a traditional way. 'In Hong Kong, it is very convenient to reach your broker and place orders on the phone, giving people less initiative to use [the] Internet to trade,' he said.
