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Hong Kong: Securities And Futures Commission Calls For Speedy Reforms

Mary Swire, Tax-news.com, Hong Kong

02 January 2001

According to Hong Kong's Securities and Futures Commission (SFC), Hong Kong's securities laws need to be reformed quickly due to rising competition with neighbouring markets and the challenge of China's impending entry into the World Trade Organisation.

The SFC's views were made known in a government paper to legislators, which read: 'As Australia and Singapore deregulate, the competition is intensifying. Further, with the mainland opening up with its accession to the WTO, Hong Kong can no longer take for granted the business it attracts as the "gateway" to the mainland.'

Australia and Singapore have reformed their securities markets in recent years, while their stock exchanges have demutualised and become listed companies. They also plan to consolidate their securities laws under a single set of regulations covering all financial markets. In January 2001 Singapore will remove stockbrokers' minimum commission system, with Hong Kong due to do the same in April 2002.

The SFC views such moves by other countries as a real threat to Hong Kong's position as the second-largest Asian financial market outside Japan and has consequently urged legislators to support the Securities and Futures Bill to bolster competitiveness. The SFC said: 'Reforms such as those imposed in the Securities and Futures Bill . . . are not only good for Hong Kong investors and intermediaries but are imperative for Hong Kong to maintain its position as the favoured financial centre . . . for the rest of Asia outside Japan.'

The bill, at present under review by legislators, would consolidate and replace the existing 10 securities ordinances. It would also add new regulations such as empowering the SFC to regulate Internet trading, make insider dealing a criminal offence; and tighten the regulations concerning the securities business of banks. It was generally hoped that the bill would be passed in April, but it is now likely to be later in 2001 given the complicated nature of the bill.

One of the main concerns of the SFC is that Hong Kong's existing securities laws are outdated, being more than 20 years old and containing no provision for electronic trading. The new bill will address this issue and allow Hong Kong access to the US model for electronic trading networks.

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