The ability of Hong Kong Exchanges and Clearing to police listed companies came into question again after the securities watchdog stepped up its role as a corporate regulator over the last year. In its annual report for the financial year ending in March, the Securities and Futures Commission (SFC) said it issued a record 9,752 requests for brokers and fund managers asking for information about the unusual share movement of some stocks. This is up 71 per cent from the previous financial year. The data does not include material since the start of the market in April which saw some stocks soar 40 to 50 percent in a single day. The SFC publicly said it was investigating trading of Hanergy Thin Film Power shares after its price dropped 47 per cent in 70 minutes on May 20. The report showed the SFC has a new team to check on company announcements posted on the HKEx website and has raised 201 enquiries during the year. In 70 cases, the listed companies issued a clarification of their announcement after enquiries from the SFC. This duplicates what the stock exchange is already doing since it HKEx has staff to monitor the announcement of these companies. The SFC has also posted 20 announcements on its website to warn investors about some companies whose public floats are concentrated in a small number of shareholders. Then we see a similar announcement pop up on the HKEx website. Another overlap is the dual filing system introduced since 2004, the SFC vets the new listing with the stock exchange. During the last year, the SFC has given comments on 151 of the 164 listing applications – which covers almost every application. When the SFC first started to vet the new listing with the stock exchange in 2004, one may argue the SFC does not have a big team or the experience to approve new listings. But 11 years on, the SFC clearly has the talent and experience to do the job alone. What is more important is the SFC is a statutory regulator so if it found anything wrong, it could prosecute the companies or directors, or ask the court for an order to seek compensation for investors. The HKEx does not have the same power and it can only reprimand the companies or ask the directors to take some classes to learn corporate governance. It is not a bad thing to see the hard work of the SFC to crack down on malpractices. The key question to ask is why do we need two regulators to do the same thing. Letting the SFC to do the regulators’ job alone would be more effective and efficient, leaving the HKEx to focus on making money for its shareholders. enoch.yiu@scmp.com