Jake's View

Pay handed out to SFC staff is way out of line with its deficit

The Securities and Futures Commission has incurred a HK$355.6 million loss while at the same time its 867 staff members were paid an average of HK$1.39 million. It is long past time that some restraints were imposed on these people

PUBLISHED : Saturday, 17 June, 2017, 11:24pm
UPDATED : Sunday, 18 June, 2017, 1:44am

With all its new rules requiring listed companies to tell the market quickly of any significant news affecting them, you would think that what is sauce for the corporate gander is sauce for the Securities and Futures Commission (SFC) goose.

Not so.

In blowing its own trumpet for its just released annual report, the SFC tells you that to “cut across all our regulatory functions, we have adopted ... organisational changes and cross-divisional teams to deploy our existing resources and expertise more effectively.”

You are also told that the SFC has conducted 312 risk-based on-site inspections of intermediaries and made 8,960 requests for trading and account records from intermediaries.

But you are left to your own devices to discover that it incurred a loss of HK$355.6 million in the year to March 31, pretty well on HK$1 million a day, and that this loss would have been HK$132.5 million greater but for a “revaluation of equity funds”. It was in profit the year before.

Why such a thumping big deficit?

Does the SFC really need 841 staff, each earning an average HK$1.3m annual salary?

Turn to the chart and you can see that its 867 staff members were paid an average of HK$1.39 million during the year, which is getting near three times what the average professional in Hong Kong is paid, and that this pay has again risen while average professional pay was effectively frozen.

The pay margin is actually greater than this because about 20 per cent of SFC’s people are support staff and you can be sure they don’t pay the tea lady HK$1 million a year. The professionals probably top an average of HK$1.5 million. Now find me any other organisation of more than 800 people in Hong Kong which pays anywhere near that much. Go ahead. Try. Try harder.

The problem is that we unwisely allowed the SFC to write its own establishing law, the Securities and Futures Ordinance, and, in order to fund itself, it then imposed a levy on the stock market dealing, which now runs at 0.0054 per cent per trade.

It may not seem much but the boom in market turnover in the last 10 years brought in so much from the levy that the SFC built up a treasure trove of HK$6.9 billion, which it now wants to use to buy its own office space. What little supervision the financial secretary now exercises over it will truly be gone then.

So it is not about to go bust, although now operating at a loss. As a government agency it is immortal anyway. But as the second chart shows, the stock market turnover on which it relies is now way down, even in what is meant to be a strong bull market. The future thus holds the prospect of continuing and growing deficits.

What it does not yet hold is any indication that the SFC realises how far out of line its staffing and pay numbers have gone. It is long past time that some restraints were imposed on these people.