The Hong Kong Stockbrokers Association has criticised banks offering cash rebates to attract retail investors to the Tracker Fund. Stock brokers are banned by stock exchange rules from giving any form of cash rebate to clients when dealing stocks, according to association chairman Paul Fan Chor-ho. But as banks are conducting their securities business under exempted dealer status, they are not under the same restriction. Mr Fan said the association would today send letters to relevant bodies - including the stock exchange, Securities and Futures Commission and Exchange Fund Investment (EFI) - to express their concern and ask for clarification regarding the rebate issue. Banking sources said some banks were offering clients a 1 per cent cash rebate when they subscribed to the Tracker Fund. The fund's prospectus states that investors should pay 1 per cent commission to brokers or banks, compared with the 0.25 per cent minimum commission investors pay to buy and sell stocks. 'It's a good deal, even giving out the 1 per cent commission rebate, we can still receive a 1.5 per cent government commission for the sale of the fund,' one banking source said. 'There is not much work involved, all we need to do is just chop the application forms.' Mr Fan said the EFI and regulators should ensure a level playing field between banks and brokers. 'The most important thing is to keep the rules of the game fair. Both banks and brokers should be treated equally in the commission structure when selling the Tracker Fund,' he said. The stockbrokers association earlier attacked the EFI for being unfair to brokers when only 16 firms were chosen as retail co-managers for the sale, leaving the other 500 brokerages to have to subscribe for their clients through them. The arrangement would have seen the retail co-managers receive a 1.75 per cent government commission and the rest an undefined rebate from the 16 firms and the 1 per cent commission. The dispute was settled last Friday when the co-managers agreed to rebate 1.5 per cent of the government commission to the other brokers, keeping only 0.25 per cent for themselves.
