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FINANCIAL AND MONETARY AFFAIRS
insurers and requires them to submit financial statements and other relevant information to the authority annually. It provides that any person who is not considered by the authority to be a fit and proper person to be associated with an authorised insurance company cannot acquire a position of influence in relation to such company. It also empowers the authority to intervene in the conduct of the business of insurance companies in certain circumstances. Where the authority has cause for concern, it may take remedial or precautionary measures to safeguard the interests of policy holders and claimants, including the limitation of premium income, the restriction of new business, the placing of assets in custody and petitioning for winding-up the company involved.
Self-regulatory measures to strengthen discipline in the insurance market have been formulated by the insurance industry after consultation with the government. The measures comprise the adoption by the insurance industry in 1989 of two Statements of Insurance Practice governing the writing of insurance contracts for long term and general insurance business, and the establishment in February 1990 of an Insurance Claims Complaints Bureau which provides an independent avenue for resolving claims disputes arising from personal insurance policies. Proposals for the self-regulation of insurance intermediaries (i.e. agents and brokers) are also under consideration. The self-regulatory system will benefit Hong Kong as a developing international insurance centre.
The Securities and Futures Commission
The Securities and Futures Commission (SFC) was established on May 1, 1989, following enactment of the Securities and Futures Commission Ordinance. The enactment of the ordinance represented a first, important phase in the overhaul of securities legislation in Hong Kong and the implementation of some of the major recommendations made by the Securities Review Committee in May 1988.
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 SFC. It provides a general regulatory framework for the securities and futures industries, leaving certain elements to be provided by regulations, administrative procedures and guidelines developed by the commission.
The SFC was established as an autonomous statutory body outside the civil service. It has 10 directors, half executive and half non-executive. The Governor appoints the directors and may give policy directions to the commission. Each year the commission must present the Financial Secretary with a report and an audited statement of its accounts, which are laid before the Legislative Council.
The SFC seeks advice on policy matters from its Advisory Committee, whose independent members are appointed by the Governor and are broadly representative of market participants and relevant professions. Decisions of the SFC relating to matters concerning the registration of persons and intervention in their business are subject to appeal to the Securities and Futures Appeals Panel which is also appointed by the Governor.
The SFC is funded largely by the market and partly by the government. Market contribution is in the form of fees and charges for specific services and functions performed (on a cost recovery basis), plus a statutory levy on transactions recorded on the Stock and Futures Exchanges. The annual budget is estimated at about $180 million. As of December 31, 1991, the SFC had a total establishment of 237.