FINANCIAL AND MONETARY AFFAIRS
Dealers in securities, investment advisers, commodity dealers and commodity- trading advisers, leveraged foreign exchange traders and their representatives have to register with the SFC. Criteria for registration are stipulated in the Securities. Ordinance, the Commodities Trading Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and the Securities and Futures Commission Ordinance. In 1997, the SFC registered 20 167 persons, of whom 568 were corporate securities dealers and 162 were commodities dealers. Among them, 338 were from overseas.
As regards the regulation of Leveraged Foreign Exchange Trading, the SFC had issued 21 foreign exchange trade licences and 1 323 licences for their representatives by the end of 1997. The SFC reviewed the Leveraged Foreign Exchange Trading Ordinance in September 1996 to consult the public on several proposed changes. In response to public comments, the SFC is considering certain legislative amendments. including insurance of traders and compensation to investors.
In 1996, the SFC consulted on the draft composite Securities and Futures Bill which aims to consolidate and streamline the existing regulatory regime for the securities and futures markets. Since the draft touched on some issues relating to fundamental policy issues, and some diverse public views were received, the government and the SFC are conducting a clause-by-clause examination with a view to sorting out the controversial items in 1998.
Insider Dealing Tribunal
The Insider Dealing Tribunal is an important feature of the regulatory framework in Hong Kong. Established under the Securities (Insider Dealing) Ordinance, the tribunal looks into cases involving suspected insider dealing referred to it by the Financial Secretary. Since it commenced operation in 1994, the tribunal has successfully concluded six cases, three of them in 1997.
Office of the Commissioner of Insurance
The Commissioner of Insurance, appointed as the Insurance Authority (IA), administers the Insurance Companies Ordinance (ICO) and exercises prudential supervision over the insurance industry in Hong Kong. The ICO prescribes a comprehensive regulatory framework for all classes of insurance business.
The ICO has two main objectives for the protection of policy holders. Firstly, it aims at ensuring the financial stability of all insurers authorised in Hong Kong. Secondly, it aims at ensuring the fitness and propriety of the management of an insurer. These objectives are achieved through the prescription of, inter alia, the minimum share capital and solvency margin requirements, and the requirement for all persons acquiring a position of influence in relation to an insurer, e.g. directors and shareholders, to be fit and proper.
Prudential supervision is carried out mainly through examination of the annual financial statements and other periodic returns submitted by the insurers. The ICO empowers the IA to take precautionary or remedial measures against an insurer, if considered appropriate, to safeguard the interests of policy holders. These measures may include limitation of premium income, placing of assets in the IA's custody, assumption of control by the IA or petitioning for the winding-up of the insurer concerned.
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