Financial and Monetary Affairs | 101
investment schemes listed in Hong Kong, while the latter will be tasked to enquire into suspected non-compliance of the accounts and financial statements of such corporations/schemes with the relevant legal and accounting requirements.
The Administration has been actively pursuing relevant issues together with HKEX, the HKICPA and the SFC. These include the composition, mode of operation, powers, financial arrangements and accountability measures relating to the proposed FRC. To take the proposals forward, another consultation on the detailed proposals will be conducted in early 2005 before introducing a bill into the Legislative Council in mid-2005.
Enhancement of the Financial Infrastructure
As part of the three-pronged strategy announced in the Budget Speech in March. 1999 for reforming the securities and futures markets in Hong Kong, the Financial Secretary appointed a Steering Committee on the Enhancement of the Financial Infrastructure in Hong Kong (SCEFI) to study and recommend the necessary improvements to the local financial infrastructure. The objective is to enhance the competitiveness of Hong Kong as an international financial centre in terms of risk. mitigation, efficiency enhancement and cost reduction. The SCEFI recommended the development of a single clearing arrangement for securities, stock options, futures. and other exchange-traded transactions; straight-through processing and a scripless. securities market. The Government, together with the SFC, the HKMA and HKEX, is pressing ahead with the implementation of various SCEFI recommendations.
In May 2004, HKEx issued its Consultation Conclusions on a Proposed Operational Model for a Scripless Securities Market. HKEX plans to implement the dematerialisation in two phases. Initially, subject to legislative amendments and finalisation of the technical model, HKEx plans to cancel the physical share certificates held by HKSCC nominees so that a percentage of shares will be uncertificated. Some physical certificates will remain in the CCASS vault for withdrawal if desired. The subsequent development, including offering general investors the option of holding uncertificated shares in the register of members, will depend on market readiness and finalisation of the working model with the agreement of all market participants. The Government is working towards the introduction of a Companies (Amendment) Bill into the Legislative Council in 2005 to facilitate the implementation of a scripless market.
Development of the Bond Market
Hong Kong possesses many fundamental advantages to develop a deep and liquid bond market, such as a sound legal system, world-class financial market infrastructure, efficient, effective and transparent regulatory regime, free flow of capital, simple tax regime with low tax rates, and abundant supply of financial professionals and intermediaries. The Government has been dedicated to facilitating the development of the bond market in recent years, including providing the necessary financial infrastructure, simplifying the issuance process,
process, removing regulatory impediments, offering tax incentives and encouraging public corporations to issue bonds. Investor education on bond investment has also been strengthened.