Opinion to Chief Executive Mrs. Carrie Lam at the Workers' Club on August 28, 2019.
Release Date: 2019-08-28
I am Mofiz Chan, a council member of the Hong Kong Securities and Futures Professionals Association, serving as the Director of Industrial Relations. Additionally, I lead the compliance department of a financial group. Below, I present the association's perspectives:
1. Cost-Effectiveness
Cost-effectiveness is a priority across all sectors. Brokerage commission revenues are diminishing, the margin business is shrinking, and the Securities and Futures Commission (SFC) continues to tighten regulations, escalating regulatory costs for brokers. How can brokerage firms sustain operations while supporting a full workforce under these conditions? Recent social events over the past two months have further deteriorated the operating environment for these firms.
2. Reinstate the Minimum Commission System for Survival
The abolition of the minimum brokerage commission has rapidly driven employees to their limits. Why should brokers' earnings be negotiable? Taxi drivers can negotiate their fares, and senior executives at the SFC can negotiate their salaries. Everyone needs to earn a living; the current scenario is troubling. Our association criticizes the government for not supporting small and medium-sized brokerages, forcing many brokers to rely on stock trading for survival, which is unhealthy.
3. Investor Protection and SME Support
Despite the government's frequent emphasis on investor protection, it overlooks safeguarding investors within the securities and futures industry. Business owners in this sector are responsible for their own business development, bearing the risks and profits when providing loans for margin trading or other securities and futures activities. Yet, the SFC's recent initiatives show a bureaucratic stance, stifling the industry's core interests with new margin business guidelines. Without leverage, where does market liquidity originate? How can banks and the industry prosper?
Our association underscores the importance of small and medium enterprises (SMEs) in supporting numerous families. Many practitioners have already transitioned to other careers.
4. Deregulation and Flexibility
When U.S. President Trump assumed office, he announced plans to deregulate the financial industry. Recent conflicts in Hong Kong have reduced the average trading volume on the Hong Kong Stock Exchange from over HK$100 billion to approximately HK$60 billion.
“If the water is too clear, there are no fish; if people are too strict, there is no wisdom.” Our association believes that over the past decade, the SFC has excessively tightened regulations in various areas, including market trading, listing, margin financing, client and product suitability, anti-money laundering, and account opening, stifling the industry's reasonable development.
If Hong Kong continues to tighten financial regulations while advanced foreign countries begin to deregulate, Hong Kong's competitiveness will naturally lag. Since the Hong Kong SAR government often emphasizes global alignment, why not align in this aspect?
Our association also proposes expanding the financial advisory committees, the non-executive directors on the SFC board, and industrial representatives from external committees.
5. Delay the Implementation of the SFC’s “Consultation Paper on the Proposed Guidelines for Securities Margin Financing Activities”
Local stock market trading and listing fundraising activities have already contracted due to recent social developments in Hong Kong, severely affecting brokers' businesses. Further restrictions on margin levels will exacerbate the operating environment for brokers. When the SFC initially introduced the guidelines, many brokers expressed concerns. Our association urges the postponement of the SFC’s October launch of the Consultation Paper on the Proposed Guidelines for Securities Margin Financing Activities” to weather the storm collectively.
6. Fair Business Practices and the Establishment of an “Anti-Dumping Law”
Over the past two decades, from the abolition of the minimum commission system to the advent of low and zero commission models, these practices have led to reduced commission income, affecting brokers' revenue and risking clients' asset security. Our association suggests that the Hong Kong SAR government establish an “Anti-Dumping Law,” a measure common in the United States and European countries. The government has a responsibility to ensure fair and reasonable development across all industries.