FINANCIAL STRUCTURE
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The committee is also responsible for advising the Securities Commission on applica- tions for authorisation. The granting of authorisation by the Securities Commission to unit trusts and mutual funds is conditional on compliance with this code. Without it, a unit trust or mutual fund may not be marketed to the public in Hong Kong.
The combined Stock Exchanges Compensation Fund - established to compensate those who suffer financial loss as a result of defaults by stockbrokers amounted to $24 million at December 31, 1978. No payments were made from this fund during the year. Deposits lodged by dealers other than stockbrokers stood at $6.7 million; the purpose of these deposits is to give limited protection to investors against a defaulting dealer who is not a member of a stock exchange. However, unlike the Compensation Fund, the dealers' deposits are not pooled. Both funds showed a sur- plus in the fiscal year to March 31, 1978. Some $1.8 million was subsequently dis- tributed proportionately to the four stock exchanges in respect of the surplus on the Compensation Fund, and some $296,000 was paid out to depositors in respect of the surplus on the Dealers' Deposit Fund.
At the end of 1978, 2,078 people were registered under the Securities (Dealers, Investment Advisers and Representatives) Regulations 1974. They included: 100 corporate dealers; 1,017 individual dealers including 906 stockbrokers on the four stock exchanges; 65 corporate investment advisers; 111 individual investment advisers; 717 dealers' representatives; and 68 investment representatives. During the year, 26 corporations were declared exempt dealers and seven corporations were declared exempt investment advisers.
The turnovers for 1978 reported on the four exchanges were: Far East Exchange, $13,728.25 million; Hong Kong Stock Exchange, $5,356.04 million; Kam Ngan Stock Exchange, $8,253.08 million; and Kowloon Stock Exchange, $120.52 million. The total of $27,457.89 million is an increase of 348 per cent on the previous year's figure.
Commodities Trading
The Hong Kong Commodity Exchange Limited is the only company which has been granted a licence to operate a commodity exchange in Hong Kong since the enactment of the Commodity Exchanges (Prohibition) Ordinance in 1973. It commenced business on May 9, 1977. During 1978, business in the cotton and sugar markets remained moderate as the exchange's activity has been affected by the absence of any sharp movements in international cotton and sugar prices. To increase business, the exchange has been considering plans to add new commodities to the list of those currently traded.
At the end of 1978, 619 people were registered under the Commodities Trading (Dealers, Commodity Trading Advisers and Representatives) Regulations 1976. They included 118 commodity dealers (43 corporate dealers and 75 individual dealers), of which 40 corporate dealers and nine individual dealers were share holders of the Hong Kong Commodity Exchange; 476 commodity dealers' representatives; five corporate commodity trading advisers; nine individual commodity trading advisers; and 11 commodity trading advisers' representatives.
The Commodity Exchange Compensation Fund, established to compensate those who suffer pecuniary loss as a result of default by shareholders of the exchange, amounted to $2.9 million at the end of the year.