CONFIDENTIAL
FM HONG KONG
TO DESKBY 121300Z FCO
TELNO 4546
OF 12113OZ DECEMBER 88
CONFIDENTIAL
(11)
056223 MDHIAN 5272
HKB 02618
TOP COPY O DIST 7
MY THIRD IPT: BACKGROUND BRIEF FOR LORD GLENARTHUR:
RECENT DEVELOPMENTS IN THE SECURITIES INDUSTRIES
BACKGROUND
1. THE GOVERNOR APPOINTED THE SECURITIES REVIEW COMMITTEE (SRC) IN NOVEMBER 1987 TO REVIEW THE OPERATION AND REGULATION OF THE SECURITIES INDUSTRY IN HONG KONG. IN ITS REPORT PUBLISHED IN JUNE 1988, THE SRC RECOMMENDED A FUNDAMENTAL REVISION OF THE CONSTITUTION AND INTERNAL MANAGEMENT OF BOTH THE STOCK EXCHANGE OF HONG KONG (SEHK) AND THE HONG KONG FUTURES EXCHANGE (HKFE), THE ESTABLISHMENT OF A NEW REGULATORY AUTHORITY OUTSIDE THE CIVIL SERVICE, AND A NEW CLEARING AND SETTLEMENT SYSTEM WITH A LONGER SETTLEMENT PERIOD FOR STOCK TRANSACTIONS.
HONG KONG STOCK EXCHANGE
2. FOLLOWING THE PUBLICATION OF THE SRC REPORT THE MANAGEMENT COMMITTEE OF THE SEHK, ON ITS OWN INITIATIVE, DREW UP PROPOSALS FOR RESTRUCTURING THE CONSTITUTION OF THE EXCHANGE IN THE LIGHT OF THE SRC RECOMMENDATIONS. THESE INCLUDED AMENDMENTS TO ITS MEMORANDUM AND ARTICLES OF ASSOCIATION TO ESTABLISH A NEW AND MORE BROADLY-BASED GOVERNING COUNCIL, ON WHICH THE INTERESTS OF CORPORATE BROKERS, AS WELL AS THAT OF THE GENERAL PUBLIC, WOULD BE REPRESENTED. THE FIRST CHAIRMAN AND ALL CANDIDATES STANDING FOR ELECTION TO THE FIRST COUNCIL WOULD HAVE TO BE APPROVED BY THE GOVERNOR. THESE PROPOSALS WERE UNANIMOUSLY ENDORSED BY SEHK MEMBERS AT AN EXTRA-ORDINARY MEETING ON 20 JULY.
3. THE NEW COUNCIL WAS ELECTED UNDER THE REVISED CONSTITUTION AT THE SEHK ANNUAL GENERAL MEETING IN OCTOBER 1988. IT CONSISTS OF 22 MEMBERS: 16 BROKER-MEMBERS, FIVE INDEPENDENT (LAY) MEMBERS AND ONE FULL-TIME SALARIED CHIEF EXECUTIVE. SIR QUO-WEI LEE WAS ELECTED CHAIRMAN OF THE EXCHANGE.
4. THE SRC REPORT ALSO RECOMMENDED REPLACING THE CURRENT ONE-DAY
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