Watchdog turns to Legco after critics force U-turn on move for wider powers The Securities and Futures Commission has hit back at a government decision to drop a proposal for the watchdog to be given the power to fine directors and listed companies for breaching stock market rules. The government's decision, revealed on Thursday, was based on the fact that 50 per cent of the submissions it received during a consultation exercise launched in January had been against the idea. But yesterday, the commission argued that the other half had supported the move. The commission has sent a four-page letter to legislators listing 21 reasons why they should back the proposal to expand its powers. 'The SFC remains of the view that it needs a fining power for listing discipline. This has received considerable market support from around half of the respondents to the government's consultation,' the SFC statement said. 'It is international practice for statutory regulators to have fining power.' The dispute further sours the relationship between the government and the SFC, whose chairman Andrew Sheng has decided not to renew his contract in September. The government is in the process of splitting his job into a non-executive chairman and a chief executive role. A war of words is expected to ensue on Monday when the consultation paper is discussed by the Legislative Council financial affairs panel. Secretary for Financial Services and Treasury Frederick Ma Si-hang will face SFC chief operating officer Peter Au-yeung. Originally, the government had proposed allowing the SFC to impose fines of up to $5 million on directors and companies for breaches of listing rules covering connected transactions and disclosures. More serious cases were to be referred to the Market Misconduct Tribunal, chaired by a judge who could impose fines of up to $8 million. Last month, the SFC issued a statement calling for its proposed fine level to be raised to $10 million - the same as it can impose on brokers, investment banks and fund managers - while advocating that the tribunal be given unlimited fining power. But on Thursday, a government source said it had been decided the SFC should not be granted new fining powers because 'half of all submissions in the consultation rejected the idea as they feared the proposal would lead to the commission doing the work of the police and the judge at the same time'. However, the source added that the tribunal would be given unlimited fining power. The commission's statement yesterday said: 'We note from the other submissions received by the government that the respondents appear to be evenly divided on whether both the SFC and the [Market Misconduct Tribunal] should have fining power.'' The SFC highlighted one submission from a legal firm representing nine investment banks. It wrote: 'There is significant support backed up by sound reasons for proceeding with the proposal to give SFC a fining power.' The government source had said giving the tribunal fining power would be enough, but the SFC rejected this. 'Relying on [Market Misconduct Tribunal] fines would deny a key enforcement tool to the SFC. Without fines being available, there is no middle ground between public reprimands for lesser infractions and disqualification of officers of corporation for more serious breaches,' the SFC said. The SFC pointed out that the US, Britain, Canada, France, Spain and Japan allowed regulators, rather than the courts, to impose fines on listed companies and directors.