Financial and Monetary Affairs | 85
The regulatory objectives of the SFC, as set out in the SFO that came into effect on April 1, 2003, include:
• to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry;
• to promote public understanding of the operation and functioning of the securities and futures industry;
• to provide protection for members of the public investing in or holding financial products;
• to minimise crime and misconduct in the securities and futures industry;
• to reduce systemic risks in the securities and futures industry; and
• to assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the securities and futures industry.
Established as an autonomous statutory body outside the Civil Service, the SFC is responsible for regulating the securities and futures markets in Hong Kong. At end-2004, the SFC had a governing body of 12 directors (five of them executive, with one of them doubling up as Executive Director of Corporate Finance and Chief Operating Officer) appointed by the Chief Executive. The Government is not involved in the day-to-day regulation of the securities and futures industry.
The SFC is funded by the market. No government funding has been sought since 1993. The revised estimate of its operating expenditure budget for 2004-05 (including depreciation) was $477 million.
The SFC seeks advice on policy matters from its Advisory Committee, which comprises three executive directors of the SFC and 11 independent members. The independent members are appointed by the Chief Executive and are broadly based and representative of market users.
Exercise of powers by the SFC is subject to a range of checks and balances. For instance, a wide range of SFC decisions are subject to appeal to the independent Securities and Futures Appeals Tribunal (SFAT) chaired by a High Court judge. In November 2000, a Process Review Panel for the SFC (PRP) was established to undertake an ongoing review of the fairness and consistency of the SFC's internal operational procedures. Members of the PRP are appointed by the Chief Executive. In May 2004, the Government published the PRP's third Annual Report, which concluded that the SFC had generally followed its internal procedures in handling. cases and that there was no serious deficiency in the SFC's operational processes. The PRP has made recommendations for improvement in certain area and the SFC has been positive in adopting them.
Broadly speaking, the SFC's work involves licensing, supervision and monitoring of intermediaries; regulation of the public marketing of unit trusts, mutual funds and other collective investment products; regulation of takeovers, mergers and other corporate activities; listing regulation under the dual filing system for IPO applicants