FINANCIAL AND MONETARY AFFAIRS
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.
Two important components of the regulatory framework in Hong Kong are the Securities (Insider Dealing) Ordinance and the Securities (Disclosure of Interests) Ordinance, which were brought into operation in September 1991. The Securities (Insider Dealing) Ordinance provides much stricter penalties for insider dealing than those previously applicable. The Securities (Disclosure of Interests) Ordinance requires that company shareholders with 10 per cent or more of the voting shares of a listed company disclose their interests and dealing publicly and that directors and executives disclose certain dealings.
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 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.
The Office of the Commissioner of Insurance will assume responsibility for the regulation of private sector retirement schemes when the Occupational Retirement Schemes Ordinance is brought into operation in mid 1993. The object of the ordinance is to provide greater certainty that retirement benefits promised to employees will be paid when they fall due. The regulatory framework is based on the four guiding principles of separation of assets, sufficient funding, independent audit and disclosure of information. It is estimated that over 20 000 schemes will be registered within the prescribed two-year transitional period on commencement of the ordinance.
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