The other two members of the committee are Equal Opportunities Commission chairwoman Annu Wu Hung-yuk and chartered accountant Brian Stevenson. An SFC letter to Ms Lau says the committee had begun to investigate the allegation, made in anonymous letters to Ms Lau and other legislators, that Mr Sheng had breached regulations by awarding a HK$3.46 million information technology contract to former SFC colleague Peter Hsueh without going to tender.

The SFC said: "The audit committee will examine the allegations independently and objectively. It has been given the additional power by the commission to engage an independent person to assist it in its works if it considers that this is necessary."

Ms Lau told the SFC that she was happy to learn the committee was now made up only of non-executive members and asked if the result of the investigation into the allegation against Mr Sheng would be published.

Andrew Sheng is already under pressure as a result of the recent 'penny-share' scandal. Senior sources have said that the government is pressing Mr Sheng to step down as a result of the fiasco last month which saw a steep plunge in many cheaply priced stocks after HKEx, for which the SFC now has at least nominal responsibility announced an ill-thought-out scheme to de-list penny shares.

Financial Secretary Antony Leung Kam-chung appointed a two-man panel to investigate the penny-stocks affair which is expected to report within a few weeks. Chief Executive Tung Chee-Hwa promised action would be taken if the report allocated blame; but many commentators are expecting a cover-up from a panel they say is not sufficiently independent.