The Hong Kong Monetary Authority (HKMA) will introduce guidelines soon which will impose the same kind of strict regulations on banks which deal in securities trading as those that are already in place for stockbrokers. The guidelines centre upon tightening up rules on employees, so that banks will need to do more reporting and put more resources into the training of securities staff.
The HKMA action comes after Hong Kong stockbrokers complained it was unfair for banks to be exempted from regulation by the Securities and Futures Commission (SFC). Staff will have to complete a securities course before banks are able to assign them to securities business, and two senior executives must be appointed to be in charge of a firm's securities business. In addition, banks will also need to bring in security controls to ensure clients' assets are not stolen or misused by bank staff.
The SFC rules require stockbrokers to execute trades immediately after they receive orders from clients. Banks at present do not need to follow the SFC rule, so they may wait hours before executing trades for clients. The new rules would oblige banks to execute orders faster than they do at present.
The HKMA guidelines form part of the Securities and Futures Bill which consolidates the 10 existing securities ordinances and regulates Internet trading. An unnamed source is quoted in the South China Morning Post as saying: 'The HKMA guidelines will make sure the banks will not receive less regulation than the stockbrokers do. This will meet stockbrokers' calls to bring in a fair competition environment among brokers and banks.'
The overall plan is for the HKMA to be the frontline regulator while the SFC will investigate serious misconduct or malpractice.
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