SFC gears its high-living ways to unsustainable revenue base

The commission points to a slide in levies from market transactions as the reason behind its HK$170.2 million deficit, but it still pays its employees almost three times as much as the average Hong Kong professional.

PUBLISHED : Sunday, 11 December, 2016, 1:42am
UPDATED : Sunday, 11 December, 2016, 1:50am

SFC bleeds red ink as turnover dries up

Business, December 9


Look through the interim report that the Securities and Futures Commission has just put out and you will find a veritable Amazon of statistics.

Did you know, for instance, that in the six months to September 30 the commission issued 268 compliance advice letters, which was up from 230 for the same period last year, or that it received 16 whitewash waiver applications, down from 29 last year? Well, now you know and don’t ask me what a whitewash waiver is.

But the only interesting statistic was tucked into the accounts section without remark. In those six months the SFC ran a deficit on operations of HK$179.2 million, compared with a surplus the previous year of HK$217.2 million.

And when our reporter very properly picked this statistic out of the morass, the SFC’s shills had the gall to say it was the market’s fault because the commission’s revenue comes from a levy on transactions and market turnover was down.

So let’s establish some more facts. As of the last full reporting year the SFC’s employment roll had ballooned to 841 people who were each paid an average of HK$1.3 million that year.


As the first chart shows, this is almost three times as much as the average professional in Hong Kong makes. For the SFC the average includes non-professional staff right down to the tea lady, although perhaps they do not run an office civilised enough to have one.

And the overpayment has not stopped. The interim report now shows total pay rising by 9.5 per cent over the previous interim compared with only a 5.6 per cent increase in staff numbers.

Blaming the market for not generating enough money to fund expenditures gone out of control is certainly a lame excuse. As the second chart shows, last year’s big turnover boom was a flash in the pan. When we last saw anything like it in 2007/08 a financial crash followed.

SFC’s quarterly losses widen to HK$50.6 million, as market turnover tumbles

We are returning to normalcy now, not departing from it. The SFC has geared its high-living ways to an unsustainable revenue base. It convinced the authorities not to make it subject to annual budget requests, as is done with every other arm of government, but grant it its very own revenue stream. And now we see the price of such budget indiscipline.

The regulators will say, of course, that they have a job to do and must do it whatever that job costs.

But, leaving aside that they have problems with the job anyway as their writ runs weak across the border and our market is now mostly comprised of mainland stocks, there is really no limit to the amount of regulation that real crusaders can dream up if they are not put on a budget.

Whatever it costs. That’s how they think. Don’t laugh.