THE Securities and Futures Commission has been accused of over-reacting in its attempts to regulate leveraged foreign exchange and threatening the future of the industry. The remarks were made by the industry's only representative body, the Hongkong Monetary Institutions Association, which has nine members from an estimated 200 forex firms. Three areas have been identified by the association as requiring further definition or to be re-considered. ''We think the capital requirement of $30 million can be excessive, unless it is clearly defined,'' association chairman Steve Huang said. He said it needed to be clarified whether that figure was paid-up capital or equity, or should be in the form of a bank deposit. ''The definition means a lot of difference to the forex firms,'' he said. ''It can mean in or out of the game. ''The 14-day grace period for ceasing operation is posing an impossible situation which could cause confusion or even panic in the market.'' He said dealers usually hedged their position in the futures market, making it difficult to cash in within such a short time. ''The short time limit will lead to the possibility of some irresponsible dealers pulling down their shutters and disappearing with the customers deposits,'' he said. The association also believes some powers of the proposed forex Bill are excessive and the penalties overly harsh. ''The penalties on licensed traders and shareholders are excessive. They outweigh the crime involved,'' Mr Huang said. ''It is unreasonable that someone committing a crime in financial dealings can be sentenced to seven years' imprisonment.'' He said the penalties seemed to be drawn up arbitrarily and the ''fit and proper'' requirements need more definite qualification and should be similar to those used for the securities and futures markets. The association plans to spend $2 million on studying the Bill with its legal and financial advisers before making a presentation of its comments to the Legislative Council Bills committee. The Bill first went before the Legislative Council this month.
