FINANCIAL AND MONETARY AFFAIRS
authorised institutions. Off-site reviews involve the analysis of the regular statistical returns, and accounting and other management information supplied by institutions with a view to assessing their performance and compliance with the Banking Ordinance. Such reviews are followed by prudential interviews with institutions' senior management, at which the business, prospects and potential areas of concern of institutions are discussed. This broader approach to supervision is enhancing the office's ability to identify potential areas of concern which can be followed up by on-site examinations. The principles of the revised concordat issued by the Committee on Banking Regulations and Supervisory Practices, which meets regularly at Basle in Switzerland, and the principles of worldwide supervision of banking groups based in Hong Kong, are accepted and practised.
The Securities and Futures Commission, which was established in May 1989 in response to the weakness in Hong Kong's financial markets at the time of the October 1987 world stock market crash, exercises prudential supervision of the securities, financial investment and commodities futures industry in Hong Kong. It administers the Securities and Futures Commission Ordinance, the Securities Ordinance, the Protection of Investors Ordinance, the Commodities Trading Ordinance, the Stock Exchanges Unification Ordinance, the Securities (Disclosure of Interests) Ordinance and the Securities (Insider Dealing) Ordinance.
The Securities Ordinance and the Stock Exchanges Unification Ordinance, together with the Securities and Futures Commission Ordinance, provide a framework within which dealings in securities are conducted and the Stock Exchange operates, enabling trading in securities to be regulated. They require the registration of dealers, dealing partnerships, investment advisers and other intermediaries and provide for the investigation of suspected malpractice and the maintenance of a compensation fund to compensate clients of defaulting brokers.
The Protection of Investors Ordinance prohibits the use of fraudulent or reckless means to induce investors to buy or sell securities, or to induce them to take part in any investment arrangement in respect of property other than securities (the latter being controlled by the Securities Ordinance). It regulates the issue of publications related to such investments by prohibiting any advertisement inviting investors to invest without the advertisement first being submitted to the commission for authorisation.
The Commodities Trading Ordinance, together with the Securities and Futures Commission Ordinance, provides a regulatory framework within which the Futures Exchange operates and dealers, commodity trading advisers and representatives conduct their business. It includes provisions for the registration of dealers and their representatives and the maintenance of a compensation fund to compensate clients of defaulting commodity dealers.
The Office of the Commissioner of Insurance exercises prudential supervision of the insurance industry in Hong Kong. It administers the Insurance Companies Ordinance which brings all classes of insurance business under a comprehensive system of regulation and control by the Commissioner of Insurance (Insurance Authority). Conducting insurance business in or from Hong Kong is restricted to authorised companies, to Lloyd's and to certain underwriters approved by the Governor in Council. All new applications for authorisation are subject to careful scrutiny by the Insurance Authority to ensure that only insurers of good repute who meet all the criteria of the ordinance are admitted. The ordinance stipulates minimum share capital and solvency requirements for all authorised
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