FINANCIAL AND MONETARY AFFAIRS
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government. Certain of these proposals are likely to be put into effect in 1990 and will benefit Hong Kong as a developing international insurance centre.
The Securities and Futures Commission
The enactment of the Securities and Futures Commission Ordinance on April 13, 1989, represents a first, important phase in the overhaul of securities legislation in Hong Kong. It also represents completion of the implementation of some of the major recommendations made by the Securities Review Committee in May 1988, following the stock market crash in October 1987.
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The ordinance transfers the functions of the former Securities Commission, the Commodities Trading Commission and the Office of the Commissioner for Securities and Commodities Trading to the new Securities and Futures Commission, upon its establish- ment on May 1, 1989. It provides a general regulatory framework for the Securities and Futures Commission, leaving the details to be provided by regulations, administrative procedures and guidelines now being developed by the commission in full consultation with the market and the government where appropriate.
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The commission was established as an autonomous statutory body outside the civil service for the regulation of the securities, futures and financial investment industry. It is charged with the responsibility to ensure market integrity and protection of investors at a reasonable cost and at a level which is broadly comparable to that in other international financial centres, having regard to Hong Kong's own circumstances and needs.
The commission is governed by 10 directors, divided equally between executive and non-executive directors, the chairman being an executive director and having a casting vote. The non-executive directors provide independent advice to the commission's manage- ment and are actively involved in policy formation. The Governor appoints and has power to dismiss the chairman and directors. He is able to give policy directions to the commission and the Financial Secretary may require it to provide information relating to its activities.
It seeks advice on policy matters from its advisory committee, members of which are appointed by the Governor and are broadly representative of the market and relevant professions. Certain decisions of the commission are subject to appeal to the Securities and Futures Board of Appeal, which is also appointed by the Governor. These decisions relate to applications for, or suspension or revocation of, registration of persons, and to the intervention of registered persons' business.
Each year the commission is required to present to the Financial Secretary a report and audited statement of accounts, which are laid before the Legislative Council. Its annual budget must be approved by the Governor and the Director of Audit is able to examine its books.
The commission is funded largely by the market, but partly by the government. Excluding start-up costs, the annual budget of the commission is estimated at about $140 million at 1989 prices. Market contributions are in the form of fees and charges for specific services and activities performed by the commission on a broad cost-recovery basis and a statutory levy on transactions recorded on the Stock and Futures Exchanges. The total government contribution towards the commission in 1988-9 amounted to $220 million in the form of a start-up grant, an annually recurrent subvention and an interest-free advance.
The commission plays a prominent role in the implementation of other recommenda- tions of the Securities Review Committee in conjunction with the government and the two