out in consultation with the Exchanges and a further paper will be submitted when these have been finalised. We are conscious of the need both to ensure that the costs of intermediation do not become disproportionate to those in other financial centres and to avoid an undue proportion of the costs of supervision falling upon the ordinary tax payer.
Relationship between the SFC and the Government
18
The SRC recommends a number of checks and balances to provide for the accountability of
of the SFC to the Government. These have already been set out at Annex A. Subject to the possible modification identified in paragraph 13, we feel that these recommendations should be sufficient.
19
In addition, the Securities Ordinance provides
provides that the SC shall, when required by the Financial Secretary, furnish him with reports regarding the policy that it is pursuing or proposes to pursue. We believe that a similar relationship should be retained between the SFC and the Administration.
Financial and Staffing Implications
20
In addition to establishing on a temporary basis of an implementation unit within the Monetary Affairs Branch headed by an Administrative Officer Staff Grade B, we have recruited a London merchant banker, Mr Robert Owen, as Consultant to the Financial Secretary to assist in the implementation of the SRC recommendations. It is the intention that he should in due course head up the SFC as and when it is created.
21
It is estimated that the cost of employing the consultant for nine months will be in the region of $1.6 million. The estimated annual cost of the implementation unit is about $5 to $6 million. Posts in the unit will be created on a supernumerary basis for as long as necessary to implement the recommendations of the SRC. The provision of funds will be subject to the approval of the Finance Committee of Legislative Council.
22
the
The financial implications arising specifically from establishing the SFC will be addressed in a subsequent paper but it is envisaged that the bulk of the costs will be met by users of the market. The Government would however also need to pay off those members of the present OCS staff who would be made redundant as a a result of the dis-establishment of the OCS. Subject to Members' approval of the broad principles set out in this memorandum, detailed staffing and budgetary requirements and related financial implications would be worked out as a matter of priority.
CONFIDENTIAL