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HONG KONG OFFSHORE BUSINESS
SECTORS
- HONG KONG BANKING
AND FINANCIAL SERVICES
- HONG KONG VENTURE CAPITAL
SECTOR
- HONG KONG INVESTMENT FUND
MANAGEMENT
- HONG KONG FINANCIAL HOLDING
AND INVESTMENT ACTIVITIES
- HONG KONG HEADQUARTERS
COMPANIES
- HONG KONG BOOKING
CENTRE COMPANIES
- HONG KONG PROFESSIONAL
SERVICES
- HONG KONG INSURANCE
- HONG KONG SHIP MANAGEMENT
AND MARITIME OPERATIONS
Hong
Kong has the world's 10th largest securities market
and the second largest in Asia after Tokyo. As
of March 2000 the Hong Kong Stock Exchange and
the Futures Exchange were merged into Hong Kong
Exchanges and Clearing (HKEx). The launch of the
Growth Enterprise Market (GEM) in November 1999
for smaller and high growth companies has broadened
Hong Kong's stock market, although the timing
of GEM's launch was unfortunate, and the 'dotcom'
shakeout in 2000 weakened its initial impact.
The influx of Mainland China issuers into Hong
Kong, boosted by economic reforms, has accelerated
the growth of the Hong Kong market.
Being
the most liquid overseas market for mainland enterprises,
Hong Kong's capital market will play a key role
in funding China's state-owned enterprises reform,
as well as its massive infrastructure development
program.
Hong
Kong Exchanges and Clearing (HKEx) saw a 67% year-on-year
income surge in the first half of 2007 to HKD3.16
billion (USD404 million), driven by higher turnover-related
income.
Net
investment income more than doubled as a result
of higher net interest income and a surge in fair
value gains of corporate fund investments this
year. Moreover, HKEx disposed of its entire interest
in Computershare Hong Kong Investor Services,
and generated a HKD206-million gain.
According
to HKEx's 2007 half-year interim results, the
average daily turnover in the period was HKD59.2
billion, up 82% over a year earlier. The average
daily number of derivatives contracts traded on
the Futures Exchange surged 50% to 145,852, while
that for stock options contracts traded on the
Stock Exchange doubled to 131,040.
There
were 47,417 new local companies registered under
the Hong Kong Companies Ordinance in the first
six months of 2007, up 19.12% on the same period
last year, 32 newly listed companies on the Main
Board.
The total number of live companies registered
was 622,318,
Companies
Registry statistics show that 316 new overseas
companies established a place of business in Hong
Kong and registered under Part XI of the Companies
Ordinance in the first half of 2007, up 12.46%
on the same period last year. The total number
of overseas companies stood at 7,854.
At the end of June, 2007, there were 1,002 and
194 companies listed on the Main Board and Growth
Enterprise Market respectively, with a total market
capitalisation of about HK$15.85 trillion.
In
June, 2006, the float of Bank of China raised
a total of US$9.725 billion (HK$75.9 billion)
at a price of HK$2.95 per share.
The retail tranche, was raised from 5% to 10%
of the IPO through a 'clawback' mechanism. The
international tranche was also 'very significantly
over-subscribed' said the bank.
Several
foreign institutions acquired shareholdings in
BOC in the run-up to the listing, including a
5% stake by Singaporean government investment
company Temasek Holdings, and a 10% stake by a
consortium of US banks. There was opposition in
Beijing to the Hong Kong 'H'-share flotation from
domestic interests who were opposed to what they
see as 'selling off the family silver'. Under
the terms of its WTO accession, China is due to
open up its heavily-restricted domestic banking
sector in 2007.
The
Hong Kong operations of the Bank of China were
regrouped into Bank of China (Hong Kong) in 2001,
and a 2002 flotation was successful, with the
90% institutional tranche being over-subscribed
4.3 times, and the 10% retail tranche being over-subscribed
24 times. 35% of the issue was allocated to retail
investors, and 65% to the institutions. The 385,000
applicants receiving shares made the bank the
second most widely held public company in Hong
Kong, after railway operator MTRC, which has more
than 400,000 shareholders.
The
China Construction Bank, another of the top four
mainland banks, raised US$8bn in October, 2005.
According
to John Tsang, Hong Kong government Financial
Secretary, the Special Administrative Region's
(SAR's) growing stake in Hong Kong Exchanges and
Clearing (HKEx) relects the government's long-term
confidence in the exchange.
Tsang's
comments came as the Hong Kong government announced
that its shareholding in HKEx for the Exchange
Fund account had grown beyond 5% to 5.88%.
"HKEx
is one of Hong Kong's principal engines of growth,
an important part of our financial infrastructure,
and a key agent in the growth of Hong Kong as
an international financial centre," Tsang
stated.
"This
acquisition underlines the Government's support
for HKEx and enables the Government, over the
longer term, to contribute as a shareholder to
the promotion of HKEx's strategic development,"
he added.
The
government made a voluntary disclosure that it
had become a miniorty controller of HKEx on September
10 2007, after having notified the exchange itself
on September 7.
After
Chinese Premier Wen Jiabao announced in Singapore,
in November 2007, that he did not agree with the
cash withdrawal limits placed on Shenzhen banks,
they were hastily withdrawn, leaving the underground
pipeline that has been sustaining Hong Kong's
booming stockmarket in full flood.
"The
Shenzhen banks' motives are good but they could
employ better methods," said Wen. "We
should have taken measures that were more effective
and that were acceptable to the public."
The
Chinese authorities are of course fully aware
of the flow of illegitimate cash to Hong Kong,
caused by Chinese exchange controls, and they
are under heavy pressure to liberalize the renminbi.
It was this that had led to the now-abandoned
'through-train' proposal to allow investment in
Hong Kong stocks through defined channels.
Shenzhen
banks had set a daily withdrawal limit of Renminbi
30,000 on personal accounts. "If the illegal
fund flow is not controlled, it will affect the
financial stability in the country, including
Hong Kong," Wen said, but it's not clear
what action Beijing will now take.
It's
not just the official banks that operate the pipeline:
the local equivalent of hawali money-exchange
networks are involved, and there are many parallel
unofficial links between individuals. In fact
the border is so porous that it's difficult to
see how some form of liberalization can be avoided.
Local estimates are that the daily flow of cash
between Hong Kong and Shenzhen amounts to several
billion renminbi.
Listing
A major element of HKEx’s mission depends
on demonstrating the effective discharge of its
regulatory responsibilities. The Listing Division
has a keen and continuing interest in demonstrating
that it is discharging its responsibilities effectively
and making itself more effective. HKEx welcomes
the steady improvement of corporate governance
in Mainland companies listed in Hong Kong and
intends to do all it can to ensure that this improvement
continues.
Amendments to the Main Board and GEM Listing Rules
designed to enhance corporate governance and market
quality came into effect on 31 March 2004. They
included new provisions on notifiable transactions
and connected transactions, revised classifications
of notifiable transactions and connected transactions,
revised definitions of the terms “reverse
takeover”, “connected person” and
“associate” of a connected person, revised
requirements for refreshment of general mandate
and revised requirements on the disclosure of
directors’ remuneration in annual reports.
In addition, there have been changes in the initial
listing eligibility criteria, listed companies’
continuing obligations and the disclosure requirements
at the time of listing.
In
September, 2006, the SFC released the Consultation
Conclusions on the reform initiatives proposed
under a drive to modernise the regime governing
the public offering of shares and debentures in
the Companies Ordinance.
In
August, 2005, the SFC had consulted the public
on 21 reform initiatives relating to the CO prospectus
regime and received 26 submissions from market
practitioners, issuers and professional bodies.
There
was broad support for the majority of the initiatives,
but certain of the proposals have been revised
in light of public comments received.
Brian
Ho, the SFC’s Executive Director of Corporate
Finance, announced that: “Implementation of the
initiatives proposed to be taken forward will
more closely align Hong Kong's public offering
regime with that of other leading jurisdictions
and support Hong Kong's continuing role as an
international financial centre."
"Consolidation
of all securities laws in a single piece of legislation
marks a significant step after the implementation
of the Securities and Futures Ordinance in our
drive to conform the regulatory philosophy and
eliminate opportunities for regulatory arbitrage.”
Some
of the key initiatives proposed and consulted
upon were:
- To
consolidate securities laws in a single piece
of legislation, the provisions in the CO relating
to the public offering of shares and debentures
will be moved to the Securities and Futures
Ordinance (SFO) as a discrete part separate
from the investment advertisement regime in
Part IV of the SFO.
- To
harmonise the legal and regulatory treatment
of investment arrangements and instruments with
broadly similar risk and reward exposure, public
offers of structured products will be subject
to regulation under Part IV of the SFO, whilst
plain vanilla share or debenture offers will
be governed under the separate prospectus regime.
This should reduce regulatory arbitrage.
-
The focus of the prospectus regime will be changed
from a “document-based” to a “transaction-based”
approach by regulating the act of offering rather
than any document containing the offer.
- Offerors
will be regulated without regard to place of
incorporation or their legal form. This will
bring the prospectus regime into line with the
investment advertisement regime in Part IV of
the SFO, which regulates advertisements and
invitations issued by any person, whether made
in writing or otherwise.
- To
attach liability unequivocally to specified
persons responsible for the prospectus, prospectus
liability will be imposed on (i) the issuer
and/or the offeror of the shares or debentures;
and (ii) each person who accepts, and is stated
in the prospectus as accepting, responsibility
for the prospectus. In view of the market response
and the new Guidelines for Sponsors and Compliance
Advisers issued by the SFC which will come into
effect on 1 January 2007, imposition of prospectus
liability on sponsors is viewed as premature.
- In
order to provide investors with withdrawal rights
where materially adverse new developments occur
prior to the results of allocation being announced,
the issuer of the prospectus will be required
to publish a supplemental prospectus and provide
successful applicants with a right to withdraw
their allocations and be repaid in full. The
offer period will not be required to be extended
or re-opened – this will allow the scheduled
date for refund of surplus application moneys
and unsuccessful applications to remain unchanged.
According
to the SFC, the following proposals will not be
taken forward at this stage:
(i)
Proposal 9 – to extend the classes of persons
who may claim compensation for a misstatement
in a prospectus to subsequent purchasers who buy
in the secondary market;
(ii)
Proposal 10 – to remove the requirement for claimants
to prove that they have actually read and relied
on the prospectus when making a claim for compensation;
(iii)
Proposal 17 – to extend the 3-day waiting period
before allotments of shares or debentures in the
case of initial public offers of shares or debentures
and the removal of the 3-day waiting period for
allotments in the case of public offers of shares
or debentures of a class already listed;
(iv)
Proposal 18 – to provide that an application form
or procedure for shares or debentures may not
be distributed or implemented by any person unless
it is accompanied by or contained in a prospectus
which complies with the prospectus provisions
or is exempted from them;
(v)
Proposal 20 – to introduce a separate regulatory
regime to regulate offers to employees and their
dependants, including a requirement for a declaration
of solvency and going concern by the directors
and auditors of the company; and
(vi)
Proposal 21 – to provide that an issue or sale
of securities in contravention of the law should
be void or voidable.
In
September, 2006, it seemed that Chinese 'red chip'
listings are threatened by new rules which came
into effect to control abuse of the restructuring
process needed to transfer assets into offshore
control.
A
'red chip' share is formed when a Chinese company
transfers its assets into the ownership of an
offshore holding company, typically in the Cayman
Islands or the British Virgin Islands, prior to
a listing in Hong Kong or New York. Historically
there has been little control over the process,
allowing Chinese owners to sell assets to the
offshore companies at artificially low prices,
encouraging capital flight.
The
new regulations cover the valuation of assets
to be transferred, and permission for each issue
will have to be given by the Ministry of Commerce.
Brokers and issuers fear that if the rules are
applied retrospectively, whether to already listed
stocks, or to those in the issuance pipeline,
there will be delay and confusion in the markets.
The
new rules also seek to control the use of the
proceeds of a red chip issue by requiring listed
companies to repatriate funds obtained through
listing and to report on the process to the State
Administration of Foreign Exchange.
Measures
to improve the registration system for non-Hong
Kong companies were put in place from December
14, 2007, the Financial Services and the Treasury
Bureau announced.
Under
the Companies (Amendment) Ordinance 2004: the
registration regime for overseas companies will
be modernised; "overseas companies"
will be renamed "non-Hong Kong companies"
and will be obliged to file a full annual return;
a new service of issuing certificates of registration
in respect of non-Hong Kong companies will be
introduced.
The
Registrar of Companies has also appointed the
same date to implement the Companies Ordinance
(Amendment of Eighth Schedule) Order 2007, giving
effect to the amended statutory fees for non-Hong
Kong firms.
The
Order replaces the existing filing fees concerning
non-Hong Kong companies with a single filing fee,
and introduces a new fee for the issue of registration
certificates.
Escalating
fees for the late filing of annual returns by
non-Hong Kong firms are also being introduced,
to encourage compliance with the filing requirements
under the Companies Ordinance and the timely disclosure
of corporate information.
As
regards the new single filing fee, it is set on
the basis of the "revenue neutral" principle.
However, according to the announcement, non-Hong
Kong companies, on average, would not pay more
when compared with the fees payable at present
as long as their annual returns are filed within
the deadline prescribed in the Companies Ordinance,
that is, within 42 days after the anniversary
date of registration.
The
Hong Kong Stock Exchange has adopted measures
to enhance the stock trading suspension mechanism's
transparency, Secretary for Financial Services
and the Treasury Professor KC Chan announced in
October, 2007.
The
measures include publishing the conditions imposed
for resumption, asking the suspended issuer to
publish a regular update, and automatically invoking
the delisting procedure if a security has been
suspended for a prolonged period of time without
the issuer taking steps to achieve resumption.
Professor
Chan told lawmakers on Wednesday that as of October
16, 29 Main Board and 16 Growth Enterprise Market
listed companies were regarded by the exchange
to be long-suspended. Thirty-eight of these companies
have been suspended from trading for a period
of more than one year.
Professor
Chan explained that: "For these companies
there are a variety of reasons why trading has
yet to resume after such a period. Resumption
of trading will depend on the circumstances of
each company and its efforts to address the circumstances
pertaining to the on-going suspension. Most of
these companies are experiencing financial difficulties
or lack sufficient operations to maintain their
listing status."
According
to Chan, the Hong Kong government has stated that
a lack of co-operation or responsiveness from
listed issuers was the main cause for the prolonged
suspension of a number of them, in addition to
the lack of transparency in the process. The majority
of such suspended listed issuers either delayed
the provision of relevant information, or provided
incomplete and piecemeal information regarding
the problem that led to the suspension.
Without
the full co-operation of the listed issuers, the
Exchange will be denied the information necessary
to form a complete picture of the extent of the
problems faced by a listed issuer, he added.
Technology
Hong
Kong Exchanges and Clearing (HKEx) introduced
AMS/3, a third generation automatic order matching
and execution system, in late 2000. In February
2001 it added an Order Routing System (ORS). ORS
is an open system that enables investors to place
stock market orders through the Internet, mobile
phones and other electronic channels, which may
be developed by HKEx or vendors. After an order
is placed through an electronic channel connected
to ORS, the system automatically sends the order
to a Stock Exchange Participant for approval and
submission to the market for matching and execution.
More
than 100 Stock Exchange Participants have so far
connected to ORS, and are able to offer their
clients Internet trading. All Stock Exchange Participants,
including those who have connected to the HKEx
channel, will also be able to offer their clients
electronic trading services, including Internet
and mobile trading, through Proprietary Network
System (PNS) channels provided by vendors.
CCASS
provides settlement services under which securities
are credited or debited to participants' CCASS
stock accounts and funds are recorded in the participants'
money ledgers on settlement day.
Details
of all Exchange trades, including trade data and
trade amendments, are electronically and automatically
transmitted to CCASS by the Stock Exchange on
each trading (T) day. There is no need for broker
participants to input or further confirm their
trade details in CCASS. Broker participants receive
Provisional Clearing Statements of their stock
and money positions through their CCASS terminals
shortly after 1800 hours on each T day for reconciliation.
Final Clearing Statements are available to broker
participants shortly after 1400 hours on T+1 day
for confirmation purposes.
Portware
LLC, a leading independent provider of global,
broker-neutral, multi-asset trading and strategy
systems, announced in August 2007, the opening
of its Hong Kong office to support its growing
client base in the Asia-Pacific region.
Damian
Bierman, formerly head of FIX Product Services
at trading solutions provider NYFIX, in Hong Kong,
has been appointed to head up the Portware Hong
Kong office and oversee day-to-day operations.
The office will focus on implementation management
and support, and is staffed by regional specialists
and experienced project managers from Portware’s
US headquarters.
Portware
has seen a rapid growth in demand from buy- and
sell-side firms for its easily deployed multi-asset
trading and strategy systems. Portware’s
flexible framework offers a full range of components
from ready-to-trade systems through to customizable
enterprise solutions, enabling financial institutions
to quickly integrate execution management tools
and manage complex trading strategies and risk
in one place. Through a combination of Portware’s
open Application Programming Interface (API),
plug-and-play architecture and regional development
support, Portware’s Asia-Pacific customers
are able to achieve a high degree of localization,
tailored specifically to the varied needs of the
Asia-Pacific markets.
Bank
Negara Malaysia and the Hong Kong Monetary Authority
(HKMA) announced, in October 2007, the implementation
of a cross-border delivery-versus-payment (DvP)
link between Hong Kong’s US dollar real
time gross settlement (RTGS) system.
The
DvP link will help eliminate settlement risk for
US dollar bonds issued and traded in Malaysia,
by ensuring simultaneous delivery of US dollars
in Hong Kong and US dollar bonds in Malaysia.
The
DvP settlement services provide the necessary
settlement infrastructure to support potential
issuance of US dollar bonds in Malaysia, as part
of the initiatives to promote Malaysia as an Islamic
financial centre and Hong Kong as an international
financial centre.
The
new link builds on the success of the payment-versus-payment
(PvP) link between Hong Kong's US dollar RTGS
system and Malaysia's Ringgit RTGS system that
was established in November 2006.
The
Hong Kong Monetary Authority (HKMA) has announced
the launch of the electronic trading platform
(ETP) for Exchange Fund Bills and Notes (EFBNs),
which commenced operation on 11 December 2007.
The
ETP is designed to enhance price transparency
among the market players, and streamlines the
trading process. With the launch of the ETP, market
players can identify their trade counterparties
and conclude deals more efficiently. The ETP is
designed to be flexible enough to allow it to
be set up according to the specific requirements
of individual market players.
"The
launch of the ETP is an endeavour by the HKMA
and the Treasury Markets Association (TMA) to
encourage electronic bond trading, a practice
which has increasingly been adopted by more advanced
bond markets in the world," commented Eddie
Yue, Deputy Chief Executive of the HKMA, and Chairman
of the Executive Board of the TMA.
The
launch of the ETP is one of the recommendations
arising from the Review of Debt Market Development
completed by the HKMA in late 2006. The ETP provides
the necessary infrastructure to support electronic
trading of other bonds in addition to EFBNs, and
can be extended to cover other financial instruments
available in the market. Besides market players
in Hong Kong, overseas market players are also
encouraged to use this platform when trading bonds
and other financial instruments issued in Hong
Kong.
The
ETP is developed and operated by Bloomberg LP,
with advice on functional design and testing provided
by a User Group established by the Treasury Markets
Association (TMA).
Regulatory
Structure
The Stock Exchange of Hong Kong (SEHK) operates
as a private entity. Thus when the stock market
crashed in 1987, the Securities Commission had
no legal authority to intervene in the affairs
of the SEHK. The regulatory infrastructure for
the securities industry has since been revamped
and, in 1989, the Securities and Futures Commission
Ordinance was enacted. The Ordinance provides
the legal basis for the SFC to supervise and regulate
the securities industry. The SFC now has the authority
to take actions necessary to protect the safety
of the securities market and to prosecute individuals
who breach securities market ordinances and codes.
After
the stock market crash of 1987, the SFC was charged
with overhauling the regulations that govern securities
market participants. Applicants for a license
to deal in securities or operate as an investment
adviser are now required to meet the "fit
and proper person" criterion. Applicants
seeking a dealer’s license must also have
minimum net capital of HK$5 million. Although
there is no deposit insurance for bank customers,
there is a compensating fund for individuals whose
brokers default on funds owed.
In
1991 the Securities (Insider Dealing) Ordinance
was amended, resulting in higher penalties for
insider trading. Fraud and misrepresentation are
also punishable by the SFC. Another ordinance
enacted in 1991 calls on a company’s directors
and executives, as well as those who acquire more
than 10 percent of a company’s voting shares,
to publicly disclose their dealings. Firms seeking
to list on the SEHK must make a prospectus publicly
available. The SFC has the authority to determine
which clearinghouses are permitted to settle accounts
and their rules of operation in order to ensure
a sound clearinghouse system.
In
November 2000 the Hong Kong Government introduced
the Composite Securities and Futures Bill which
combines and replaces all ten existing pieces
of securities and futures legislation. The new
law gives the Securities and Futures Commission
(SFC) the power to regulate Internet trading.
In addition the SFC will also be able to seize
the working papers of market professionals during
investigations. The Bill became law in 2001. An
independent non-statutory body, known as the Process
Review Panel, has been established to ensure that
the SFC's internal operations, including its investigative
and disciplinary procedures, are fair and consistent.
Despite the Securities and Futures Ordinance,
the Government would like to see further integration
of financial regulation, modelled on the UK's
Financial Services Authority (FSA). The government
has, for some time now, been keen to address the
perceived conflict of interest created by the
fact that the current stock market regulator,
Hong Kong Exchanges and Clearing (HKEx) is also
itself a profit-making listed firm.
In
March, 2004, it became clear that the SFC is to
be the sole regulator for listing sponsors. SFC
chairman, Andrew Sheng explained that: "In line
with the wishes of the market, there will be a
single regulatory regime for sponsors, and both
the HKEx and Commission agree that we will enforce
that regime."
He
went on to add that that although investment banks
sponsoring companies hoping to list on the stock
exchange would not be expected to assume issuer
liability: "They have to be liable for their own
standards of conduct and their role in due diligence."
"We
are pleased to note that there is overwhelming
support for giving statutory backing to certain
fundamental listing requirements and expanding
the dual filing system," announced the Secretary
for Financial Services and the Treasury, Mr Frederick
Ma.
He continued: "The proposed improvement measures
set out in the Consultation Conclusions will contribute
towards a quality market. They will further strengthen
our position as the premier capital formation
centre for the Mainland and a major international
financial centre in the region."
"We
will work closely with the Securities and Futures
Commission (SFC), the Hong Kong Exchanges and
Clearing Limited (HKEx) and all market users towards
this common goal," Mr Ma said.
The Consultation Conclusions recommend codifying
in the statute the more important listing requirements,
i.e. financial reporting and other periodic disclosure,
disclosure of price-sensitive information and
shareholders' approval for notifiable transactions.
This will be achieved by subsidiary legislation
to be made by the SFC under s.36 of the Securities
and Futures Ordinance (SFO).
In parallel, the Government will introduce a Securities
and Futures (Amendment) Bill into the Legislative
Council to the effect that breaches of statutory
listing requirements will become a new type of
market misconduct. Any persons who breach the
statutory listing requirements can either be subject
to civil sanctions imposed by the Market Misconduct
Tribunal under Part XIII of the SFO, or criminal
sanctions under Part XIV of the SFO following
prosecution.
Mr Ma added: "Any breach of statutory listing
requirements would not only hurt our investors,
but also tarnish the reputation of our equity
market. By bringing the regulatory regime for
listing in line with that for other types of market
misconduct, such as insider dealing and stock
market manipulation, we hope to demonstrate to
the local and international investors our commitment
to enhancing market quality."
To address market calls for swift action to be
taken by the SFC, the Government will also amend
the SFO to allow the SFC to impose direct civil
sanctions, namely reprimands and disqualification
orders, on specific, well-defined "primary targets"
for breaches of the statutory listing requirements.
It is the consensual view among the regulators
that these "primary targets" should be the issuers,
directors and corporate officers, who are primarily
accountable for corporate disclosure and other
corporate activities under the listing regime.
"We
shall continue to rely on the regulatory framework
under the SFO, in particular the licensing regime,
for the SFC to regulate IPO sponsors. We note
the efforts being made by the SFC and HKEx to
upgrade the regulation of sponsors," Mr Ma observed.
"We recommend that they should expedite action
on this front."
The Securities and Futures (Amendment) Bill was
introduced in 2005.
In
September, 2006, the SFC announced that investors
suffering losses due to defaults by licensed or
registered intermediaries, securities margin financiers
and banks could now claim up to $150,000 through
the Investor Compensation Fund Company.
The
SFC described "default" as meaning any situation
in which an intermediary, its employee or its
associated person is in bankruptcy, wound up or
insolvent or has committed breach of trust, defalcation,
fraud or misfeasance.
The
maximum claim is capped at $150,000 for both securities
and futures products traded on the Stock Exchange
of Hong Kong and the Hong Kong Futures Exchange.
Both margin clients and cash clients are entitled
to compensation if their intermediaries default.
The
commission explained that investors lodging claims
need documents such as the client agreement, their
latest account statements, contract notes, proof
of payment, and deposit receipts for securities.
The more evidence a claimant can provide, the
easier it will be to deal with the claim.
Hong
Kong's Securities and Futures Commission and the
Financial Reporting Council signed a memorandum
of understanding, to enhance co-ordination and
exchange of information between the two parties,
in November, 2007.
According
to a government statement, the pact outlines the
working arrangements between the two bodies in
areas of potential authority overlap and matters
of common interest, so that they can discharge
their functions effectively and enhance investor
protection.
The
agreement also outlines the framework for case
referral, and establishes principal contact points
to ensure efficient and effective communication.
The
council's Chief Executive Officer MT Shum added
that he is confident that the two parties will
work together to enhance the financial reporting
integrity of listed entities in Hong Kong.
The
Financial Reporting Council is a statutory organisation
which launched in July. Its main functions are
to investigate - with respect to listed entities
- auditing and reporting irregularities, enquire
into non-compliance with financial reporting requirements,
and to require listed entities to address any
non-compliance identified.
The
Mainland
In
its bilateral agreement with the United States
over WTO accession, China made concessions on
foreign investment in the mainland's securities
market. Foreign securities firms can establish
joint ventures (with foreign ownership less than
1/3) to engage (without Chinese intermediary)
in underwriting A-shares, and in underwriting
and trading B- and H-shares, as well as government
and corporate debt within 3 years of accession.
Moreover,
as greater foreign ownership is allowed in telecommunications,
banking, insurance and other sectors, more mainland
firms will seek a listing in Hong Kong to tap
overseas funds. Restructuring among China's enterprises
(mergers and acquisitions) should increase in
preparation for intensified foreign competition.
Restructured mainland companies will rely more
on equity finance for expansion as part of the
regional trend, bringing more business to Hong
Kong.
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