94 | Financial and Monetary Affairs
providing for an automatic levy suspension and re-instatement mechanism under which the investor compensation levies will be suspended if the net asset value of the Investor Compensation Fund exceeds $1.4 billion and re-imposed if it falls below $1 billion. In November, the SFC gazetted an exemption notice to suspend the investor compensation levies on securities and futures transactions with effect from December 19, 2005.
Review of the Companies Ordinance
The Standing Committee on Company Law Reform (SCCLR), established in 1984, meets regularly to consider amendments to the Companies Ordinance to ensure that it meets the changing needs of the business community. The Companies Registry provides secretariat support for the SCCLR.
The Overall Review of the Companies Ordinance and the Corporate Governance Review by the SCCLR resulted in a great number of recommendations for reform. The recommendations have been steadily implemented in the context of a series of major amendments to company law. For instance, the Companies (Amendment) Ordinance 2004 introduces the streamlining of prospectus requirements (which came into effect on December 3, 2004); provisions relating to shareholders' remedies such as a new statutory right to bring a derivative action (July 15, 2005) and the modernisation of the registration regime for non-Hong Kong companies (expected to become operative in 2006 to tie in with the modification of the Companies Registry's computer system).
In addition, a joint Government-Hong Kong Institute of Certified Public Accountants working group was set up in March 2002 to undertake a comprehensive review of the accounting and auditing provisions of the Companies Ordinance. The group's recommendations will be processed in the context of the rewrite of the Companies Ordinance.
Enhancement of the Financial Infrastructure
HKEX took steps to enhance its CCASS nominee services in 2005, which include, among other things, the enhancement of corporate actions processing (entitlement elections, derivative warrant conversions and subscriptions of preferential offers) and automation of payments. The aim was to streamline the procedures, provide participants with more updated information, extend service hours, and enhance the operational efficiency of the system and its participants.
HKEx also enhanced its investor account services for Investor Participants (IP) in 2005 making them more streamlined and user-friendly. An IP account is a custody account with the provision of associated nominee services. Purchases and sales of shares made by an IP and the resulting settlements continue to be handled by brokers. There were 14 235 IP accounts in CCASS at the end of 2005.
Separately, the SFC worked closely with the Government, various regulatory authorities, and industry and professional associations during the year to promote XBRL (eXtensible Business Reporting Language) for financial reporting in Hong Kong. XBRL is an evolving global standard for faster and more accurate electronic communication of business and financial data.