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SCMP Reporter

MORE legislation is needed before the Securities and Futures Commission (SFC) will be able to regulate the leveraged forex industry.

      A system to regulate fringe forex dealers will not be in place until September, according to the SFC, which is to administer new laws on leveraged trading.

    Directors of the commission have warned that the delay could lead to forex dealers engaging in a rush of bad practices to make a ''fast buck'' before the new law shuts them down for good.

    ''Following the bill's enactment, the SFC will make the necessary subsidiary legislation to flesh out the details of the regulatory framework and the licensing regime provided for in the bill,'' said Michael Wu, executive director, intermediaries, at the commission.

  To do so, the SFC intends to have subsidiary legislation written at its meeting next month and will ask the Governor to make September 1 the effective date for the bill.

   Mr Wu warned investors to take special precautions in the run-up to the bill becoming effective.

  ''There is the possibility that investor abuse could escalate in the run-up to the implementation of the regulatory regime, as firms who are unable to meet the SFC's licensing requirements may seek to make a fast buck before ceasing to trade,'' he warned.

  ''Some dealers who are obliged to close during this period may abscond with investor funds. Such incidents have been known to happen,'' he said.

  There will be a further 30-day time lag between the making of the subsidiary legislation and it coming into force.

   Once the bill is in effect, there is a 30-day limit for submitting licence applications to the SFC. After that period, all dealers who have not submitted licences will have to cease trading, according to Mr Wu.

  There are thought to be well over 100 leveraged forex dealers in Hong Kong. The SFC could not be contacted last night to say how long it would take to process applications and screen out the dealers who fail to meet rules on capital resources, accounting, auditing and rules on the fitness of people to run forex firms.

  Laws to regulate the industry were approved by the Legislative Council on Tuesday night.



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