Legislators have urged the Government to set up two consultation panels to curb the power of the Securities and Futures Commission.
They want the government to follow the example of Britain where the regulator must consult two independent panels before making any changes to existing rules.
Legislators say this is necessary because the controversial new Securities and Futures Bill would give the SFC too much power.
Brokers and legislators have expressed concerns that the bill, which would allow the SFC to penalise banks for securities malpractices, would also empower it to make certain breaches of law a criminal offence.
Anyone who breached these rules could face a heavy fine or imprisonment.
The new bill does not require the SFC to consult the market before making such rules. Although some overseas regulators have the power to make rules, there are a number of safeguards on misuse of that power.
Legislators Margaret Ng Ngoi-yee and Sin Chung-kai said the Government should expand the bill to include the formation of two consulting panels - one comprising professional industry players such as bankers, brokers and lawyers, and the other consumers.