ARPAK (2)
CONFIDENTIAL
Background
1.
The Hay Davison Securities Review Committee published its Report on 2 June. It does not pull any punches. It concludes that there was a lack of effective self-regulation and market self-discipline and that the supervisory bodies had lost control over the markets.
It was critical of the management of the Stock and Futures Exchanges and of the Securities and Commodities Trading Commission whose function was to supervise the operation of the Exchanges.
2.
The Report contains some 160 recommendations, some for immediate
action, some for the longer term. The key recommendations are:
(a) reorganisation of the Stock and Futures Exchanges;
(b) the establishment of the Government (to be known as the
Securities and Futures Commission);
(c) the establishment of a central clearing and settlement system
for securities.
3. The Hong Kong Government have accepted the main thrust of the
recommendations and are now implementing them. They recently appointed Mr Robert Owen, ex-Lloyds, to advise on the setting up of the new Securities and Futures Commission, which it is hoped will be
in place by the end of the year. Many of the reforms will require
legislation; others will be for the Stock and Futures Exchanges themselves to implement.
4. On 20 July the Management Committee of the Stock Exchange will
decide at an extraordinary general meeting whether to introduce a
new organisational structure incorporating all the key elements of the Hay Davision recommendations, including a new Chairman, new Chief Executive and a more representative Committee. If the
Management Committee fail to achieve the necessary majority the
Government will introduce the necessary legislation to bring about
the changes by the end of the year.
5. A further question still to be resolved is whether Hong Kong
needs a Futures Exchange. The matter is still under discussion: it
will be for the market to decide. Further reforms in place or
CONFIDENTIAL