HK Brokers Relieved By Capital Requirement Omission In SFC's Legco Report

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

07 July 2003

Hong Kong brokers have welcomed the news that the Securities and Futures Commission (SFC) may have scrapped a plan to increase their minimum capital requirements.

According to a report in the Hong Kong Standard, the SFC was said to be planning to increase the minimum capital requirement for brokers engaging in cash equity business that also handle investor assets 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, and those offering margin pooling from HK$10 million to HK$100 million.

However, the proposals have reportedly been omitted from the SFC's submission to the Legislative Council (Legco) on the planned new regulatory framework for brokers, leading to speculation that they have been scrapped. If implemented, it has been estimated that the capital requirement boosts could put up to 70% of the territory's small brokerages out of business.

Speaking last week, an SFC spokesman was giving little away, merely confirming that: 'The working group has not made any recommendation regarding capital requirement for these brokers and will continue to examine the issue.'

The issue is clearly still one of great concern for the Hong Kong government, however, as according to the HK Standard, it explained that:

'It is...of paramount importance to institute a financial regulatory framework that strikes an appropriate balance among protecting investors, minimising systemic risks and allowing brokers continued servicing of retail investors to keep the market buoyant.'

Recommended