The proposal to split the position of the Chairman of SFC into two roles—Non-Executive Chairman and Chief Executive Officer, was discussed in the Legislative Council.
Release Date: 2005-01-03
LC Paper No. CB(1)547/04-05(06)
(issued on 13.5.2005)
Speech at the Legislative Council on January 3, 2005
Respected Mr. Chairman, esteemed members of the council, fellow colleagues, and attendees:
I am pleased to be invited to speak here today. I represent the Securities and Futures Industry Workers Union to express our views.
In last year's Legislative Council functional constituency elections for the financial services sector, all five candidates unanimously expressed that the Securities and Futures Commission (SFC) has excessive regulation and power. They criticized the “dual regulation” and cross-industry competition by banks, which have deprived the industry of a favorable business environment and made it difficult for professionals to make a living.
Regarding the government's proposal to add a Chief Executive Officer (CEO) position to the SFC, the union hopes this arrangement can balance and review the current dissatisfaction among securities and futures companies and practitioners. We hope it will improve the business environment in the financial services sector, increase employment opportunities, and allow for greater development space in the securities and futures industry.
The union has previously expressed its opinions in the media about adding a CEO position to the SFC. You can refer to the attached documents. Here, the union does not wish to elaborate but hopes that in the future, when the government and relevant authorities introduce reforms and new legislation in the financial services sector, they will not solely focus on strengthening regulation. They should also consider improving the business environment, enhancing investor education, creating fair competition conditions, and increasing employment opportunities, to truly resolve the issues.
If the CEO position is indeed implemented, the union hopes that when appointing the chairman and CEO, the candidate should genuinely understand and be familiar with industry operations. Additionally, “nationality” should be considered, as “Hong Kong as home, the country as the root” is crucial for protecting national assets and local employment opportunities. We do not wish for outsiders to lead insiders, which could create communication barriers and misunderstandings about the industry. The union believes that most companies and practitioners in the industry are law-abiding professionals, not “thieves.” We do not want another “penny stock incident” to occur, causing losses to the Special Administrative Region and Hong Kong citizens, and damaging the reputation of an international financial center. Therefore, enhancing communication and transparency is critical.
Thank you all.
(issued on 13.5.2005)
Speech at the Legislative Council on January 3, 2005
Respected Mr. Chairman, esteemed members of the council, fellow colleagues, and attendees:
I am pleased to be invited to speak here today. I represent the Securities and Futures Industry Workers Union to express our views.
In last year's Legislative Council functional constituency elections for the financial services sector, all five candidates unanimously expressed that the Securities and Futures Commission (SFC) has excessive regulation and power. They criticized the “dual regulation” and cross-industry competition by banks, which have deprived the industry of a favorable business environment and made it difficult for professionals to make a living.
Regarding the government's proposal to add a Chief Executive Officer (CEO) position to the SFC, the union hopes this arrangement can balance and review the current dissatisfaction among securities and futures companies and practitioners. We hope it will improve the business environment in the financial services sector, increase employment opportunities, and allow for greater development space in the securities and futures industry.
The union has previously expressed its opinions in the media about adding a CEO position to the SFC. You can refer to the attached documents. Here, the union does not wish to elaborate but hopes that in the future, when the government and relevant authorities introduce reforms and new legislation in the financial services sector, they will not solely focus on strengthening regulation. They should also consider improving the business environment, enhancing investor education, creating fair competition conditions, and increasing employment opportunities, to truly resolve the issues.
If the CEO position is indeed implemented, the union hopes that when appointing the chairman and CEO, the candidate should genuinely understand and be familiar with industry operations. Additionally, “nationality” should be considered, as “Hong Kong as home, the country as the root” is crucial for protecting national assets and local employment opportunities. We do not wish for outsiders to lead insiders, which could create communication barriers and misunderstandings about the industry. The union believes that most companies and practitioners in the industry are law-abiding professionals, not “thieves.” We do not want another “penny stock incident” to occur, causing losses to the Special Administrative Region and Hong Kong citizens, and damaging the reputation of an international financial center. Therefore, enhancing communication and transparency is critical.
Thank you all.
Attachment
To be published in local media
Does the SFC's Structure Need a Review?
To be published in local media
Does the SFC's Structure Need a Review?
The Legislative Council's Financial Affairs Panel held a meeting last week to discuss the addition of a CEO position to the SFC. The debate sparked some strong reactions among officials and members. The government's proposal aims to improve the transparency and accountability of the SFC, aligning with international corporate governance models. Some international-level enterprises in the SAR, such as the Hong Kong Stock Exchange, MTR, and Kowloon-Canton Railway, are developing in this direction. While the SFC is not a corporation but a regulatory body, any model of good governance should be studied and not remain unchanged; otherwise, it stagnates and risks corruption.
The government's proposal appears to aim to clarify the division of responsibilities within the SFC, but the union is unaware of any ulterior motives. Some industry insiders believe the government is concerned about the SFC's growing power without accountability, fearing it might become a privileged institution. The government wants to prevent incidents similar to the “penny stock incident” by ensuring appropriate checks and balances between power and responsibility within the SFC. Structures like the Hong Kong Stock Exchange and MTR have chairpersons and CEOs without operational conflicts or power struggles, so the government is not worried about operational issues. Financially, there is no pressure, as the SFC's current balance of income and expenditure surpasses many commercial institutions. Some colleagues joke that if the SFC were to go public, its profitability would be highly sought after, especially since the future chairman's salary will be discretionary, posing no financial burden.
The union has no authority over the arrangement of the SFC's structure, and expressing opinions might not influence the government's decision. The union only knows that the chairman and CEO of any institution are crucial roles. The union believes any person assuming these roles at the SFC must have a certain understanding of Hong Kong's securities and futures industry, embody selflessness, and be open to accepting opinions from all sides. When establishing and implementing systems, the focus should not be solely on large corporations and funds, but also consider the needs of small and medium-sized securities and futures companies, practitioners, and small investors.
The government's plan proposes a chairman with an annual salary at the level of HKD 100,000, in a non-executive and part-time role, to avoid conflicts of interest. The chairman cannot serve as a director of a listed company or have significant interests or business transactions with listed companies. Finding a candidate meeting these conditions will likely require careful consideration. The union's only concern is that the chairman and CEO might continue with the same approach as before, focusing solely on strengthening regulation, tightening rules, and suppressing practitioners and small to medium-sized securities and futures companies, while banks gain an advantage with their securities business, upsetting the balance and causing industry anxiety.
During the Legislative Council debate, several members spoke. Some believe the SFC operates well without needing change, questioning the government's approach and urging respect for the SFC's opinions. However, there are members who support the government's idea. The union has engaged with some members but found that many are unfamiliar with the operations and realities of the securities and futures industry. Scholars also only touch on theoretical aspects without understanding the real operational situation. If the industry continues with a centralized regulatory system, it risks stifling the industry and not serving Hong Kong's interests. The union emphasizes the necessity of regulation but urges members to gather diverse opinions before presenting their views, avoiding bias by only listening to one side. They should not assume that strengthening regulation is always correct, ignoring rationality, necessity, and stifling industry development.
Recently, media reported that a securities company intends to file a judicial review in the High Court to overturn a decision made by the SFC. Such an appeal to the High Court is rare for a medium-sized, Local Chinese-owned securities firm. Sources indicate that the SFC sent two staff members to investigate the securities firm, but the firm believes procedural errors were made, with the investigators leading them wrongly to admit faults before the case was referred to the enforcement division without a chance for defense. Complaints against the SFC result in so-called internal investigations, which are closed-door meetings without the securities firm's chance for rebuttal, lacking fair hearings and transparency. If the firm's claims are true, the situation is severe, highlighting the industry's longstanding concern over the SFC's excessive power, which is why it's sometimes referred to as the “modern secret agency.” Moreover, the industry's official advisory committee, concern groups, appeal groups, and other organizations are all appointed by officials, with no union representatives, illustrating absolute unfairness to the grassroots.
The union worries about whether current SFC investigators have clear internal guidelines and fears that some investigators might overstep due to ambition, pressure, or the need to deliver results. Although the union receives complaints about the SFC's unfair practices, it's challenging to verify facts, so they cannot rashly determine right from wrong. However, with a securities company pursuing a judicial review, the union believes that officials from the Financial Services Bureau and Legislative Council members should pay attention to the development of the situation. They should review the SFC's investigation procedures, internal control procedures, appeal mechanism, and complaint mechanism, enhancing transparency to gain the trust of the industry, investors, citizens, and the international community.
Hong Kong Securities and Futures Industry Staff Union