HKSA Chief Says Existing Brokers Should Be Exempted From New Capital Requirements

by Mary Swire, for LawAndTax-News.com, Hong Kong

24 July 2003

Chairman of the Hong Kong Stockbrokers Association, Wilfred Wong Wai-sum has suggested that if the SAR government does decide to increase capital requirements for brokerages, existing brokers should be exempted.

Speaking earlier this month, Securities and Futures Commission (SFC) executive director, Alexa Lam confirmed what the territory's brokers had been eagerly anticipating - namely that there are no immediate plans to increase their capital requirements.

However, despite this temporary reprieve, Mr Wong revealed this week that the industry fears that the SFC will make another attempt to tighten capital requirements soon.

'The existing 470 brokerage houses should be exempt because they were set up under the existing regulations,' he told the South China Morning Post, explaining that:

'If the capital requirements were to be increased substantially, many brokerage houses would opt to close their businesses. The market share for the 400 smallest brokerage houses is less than 20 per cent and it is not worth it for them to add to their capital.'

Under the terms of the proposals put forward - but subsequently shelved - by a working group headed by the SFC, the minimum capital requirement for brokers engaging in cash equity business that also handle investor assets would have been increased from HK$3 million to HK$30 million.

Brokerages with margin financing operations would have seen their minimum capital requirement lifted from HK$10 million to HK$50 million, with those offering margin pooling seeing a leap from HK$10 million to HK$100 million.

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