Press Release
SFST's remarks at LegCo FA Panel meeting
Friday, June 13, 2003
Following is the opening remarks (English only) by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at a Special Meeting of the Legislative Council Financial Affairs Panel today (June 13):
Setting the Scene
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The Government places a lot of emphasis on the need to enhance the quality of Hong Kong's equity market. This is important to maintain and strengthen our competitiveness as an international financial centre in the increasingly competitive global market. The Corporate Governance Action Plan 2003 that I announced last January best illustrates the Government's commitment to improve market quality through more effective regulation of relevant market participants and protection of shareholders. These are on-going measures which the Administration, together with the relevant parties like the Securities and Futures Commission (SFC) and the Hong Kong Exchanges and Clearing Limited (HKEx), will spare no efforts to pursue.
In parallel, we will not lose sight of the need for reviewing the statutory and institutional framework for the listing regime with a view to introducing more wholesale reform in the long term.
To strengthen our competitiveness as an international financial centre, our regulatory regime must keep pace with new market developments. We should actively identify improvement measures to bring our regulatory regime in line with international standards. Measures which strengthen the gate-keeping mechanism and encourage ongoing compliance will certainly enhance investor confidence and attract more quality listings. This will help strengthen our position as the premier capital formation centre for our country.
Against this background and in the light of the recommendation of the Panel of Inquiry on the Penny Stocks Incident (PIPSI), the Financial Secretary appointed the Expert Group to Review the Operation of the Securities and Futures Market Regulatory Structure in late 2002.
The Chairman and members of the Expert Group are all reputable personalities in the market with international exposure. We are grateful for their valuable contributions.
As announced by the Financial Secretary on publication of the Report by the Expert Group, the direction recommended by the Expert Group was appropriate and would enhance the quality of our market.
At the same time, we are acutely aware of the diverse reaction of the community to the analysis and recommendations of the Expert Group. We also note that some of the broad concepts and recommendations set out in the Report have given rise to different interpretations in the market. There is a need for us to articulate in more specific terms these broad concepts and recommendations to facilitate public discussion thereon and for the Government to formulate detailed measures in taking forward the Report.
In view of the far-reaching implications of the recommendations and to ensure effective implementation, we consider that the community should be consulted further. Our aim is to enable the community to have a more thorough and in-depth understanding of the issues raised by the Expert Group. This will no doubt promote consensus building not only on the general direction but also on the specific measures for improving the listing regime in the longer term.
Common Ground
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The present position has room for improvement. That is common ground.
Competition at the international level has been ever increasing. There is no room for complacency and no excuse for non-action.
The Government, SFC and HKEx have been taking incremental steps to improve market quality within the limits of the existing regulatory regime, such as effective roll out of the Securities and Futures Ordinance in April and the implementation of the dual filing regime against misleading corporate disclosure.
To enhance competitiveness of our market as an international financial centre, there is always room for improvement. In light of local market development needs and international trends, we all agree that a comprehensive review of the statutory and institutional arrangements needs to be conducted to provide the most effective means to improve the listing regime. Against this common understanding with SFC and HKEx, the Administration is preparing for the consultation on how to take forward the Expert Group Report.
Specifically, we would need to identify the right regulatory framework governing our listing regime that can best achieve our vision for Hong Kong to be the premier capital formation centre for the Mainland. It should facilitate effective enforcement, cut out unnecessary bureaucracy and administration, avoid duplication and overlap amongst the regulators and provide issuers, company directors and intermediaries with sufficient incentive for compliance. It should strike a fine balance in embracing market savvy and regulatory expertise in order to promote healthy market development.
Though the general direction recommended by the Expert Group is appropriate, we recognise that the specific implementation issues would need to be spelt out clearly and considered carefully to facilitate community-wide consensus building. This is critical in light of the large number of stakeholders involved. Without community consensus, we cannot introduce any substantial changes to the current listing regime. The upcoming consultation will be an important part of the process necessary to reach that consensus, and meeting Panel Members today is the prelude to that process. We would like to hear Members' views on specific issues relating to the listing regime that we should focus on so that we can ensure that we do not lose sight of these issues when we embark on the consultation.
Commitment to On-going Measures
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Enhancing the quality of the financial market is one of the Government's key policy objectives, and we are highly committed to putting in place effective measures to realize this objective.
Consultation does not imply inaction, and will in no way impede our on-going measures to improve the listing regime.
We will continue to press ahead with the implementation of the Corporate Governance Action Plan presented to Members in January this year.
Achievements to-date include: effective roll out of the Securities and Futures Ordinance in April with enhanced enforcement capability of the SFC over corporate misconduct and rules to deter false and misleading disclosure; publication on 27 May of the consultation paper on the proposal for empowering SFC to take derivative actions against wrongdoers; release of the consultation paper on the regulation of IPO intermediaries on 30 May; and SCCLR launched public consultation on its Phase II Corporate Governance Review on 11 June.
We will ensure, together with SFC and HKEx, timely implementation of the initiatives outlined in the Action Plan, and spare no efforts in improving market quality with a view to enhancing the competitiveness of Hong Kong as an international financial centre and the premier capital formation centre for China.
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