XN000022-1989-01-18 — Page 3

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WEDNESDAY, JANUARY 18, 1989′

REGARDING THE NATURE OF THE RELATIONSHIP BETWEEN THE GOVERNMENT AND THE NEW SECURITIES AND FUTURES COMM1991ON (SFC) AND THE NEED FOR ADEQUATE ACCOUNTABILITY, HE GAVE AN ASSURANCE THAT TAB COMMISSION WOULD STILL BE PART OF THE WIDER GOVERNMENT MACHINERY AND ACCOUNTABLE TO THE ADMINISTRATION AND TO THE LEGISLATIVE COUNCIL EVEN THOUGH IT WOULD BE OUTSIDE THE CIVIL SERVICE.

DRAL OF AUTONOMY IN DEVELOPMENTS IN

"WHILE THE COMMISSION WILL HAVE A GREAT ITS DAY-TO-DAY OPERATIONS, ANY MAJOR CHANGES TO AND POLICY WILL STILL BE SUBJECT

TO THE APPROVAL COUNCIL, " HE STRESSED.

OF THE GOVERNOR IN

ON THE RELATIONSHIP BETWEEN THE NEW COMMISSION AND THE TWO EXCHANGES, HE SAID THE GOVERNMENT HAD HAD EXTENSIVE DISCUSSIONS WITH BOTH EXCHANGES ON THEIR RELATIONSHIP WITH THE SFC.

"WE ARE AGREED THAT, WITHIN THE PROPOSED REGULATORY FRAMEWORK, FIRST LINE RESPONSIBILITY FOR MAINTAINING THE INTEGRITY, EFFICIENCY AND FAIRNESS OF MARKETS AND FOR ENSURING THE FINANCIAL SOUNDNES9 AND CORRECT BUSINESS CONDUCT OF MEMBERS SHOULD REST WITH THE EXCHANGES.

"THE COMMISSION, FOR ITS ᏢᎪᎡᎢ . SHOULD MONITOR CLOSELY PERFORMANCE BY THE EXCHANGES OF THEIR SELF-REGULATORY FUNCTIONS, GIVE GUIDANCE, CO-ORDINATE REGULATION WITHIN HONG KONG AND INTERNATIONALLY, AND ONLY USE ITS POWER TO DIRECT THE EXCHANGES IF IT BELIEVES THAT THEY ARE FAILING TO FULFIL THEIR REGULATORY RESPONSIBILITIES EFFECTIVELY," HE SAID.

MR JACOBS NOTED THAT FOR THE SYSTEM TO WORK, THERE MUST BE CLOSE, FREQUENT AND REGULAR TWO-WAY CONTACT AND CO-OPERATION BETWEEN THE COMMISSION AND THE EXCHANGES.

"WITHOUT SEEKING TO INTERFERE IN THE DAY-TO-DAY MANAGEMENT OF THE EXCHANGES, THE COMMISSION MUST BE ABLE TO KEEP ITSELF INFORMED OF MARKET ACTIVITIES AND THE CONDUCT OF MEMBERS.

"IN EXERCISING THEIR REGULATORY FUNCTIONS, AS WELL AS IN PROMOTING THE DEVELOPMENT OF OUR FINANCIAL MARKETS, THE COMMISSION AND THE EXCHANGES HAVE SIMILAR INTERESTS AND OBJECTIVES AND WILL NERD TO WORK TOGETHER IN HARMONY TO ENSURE THAT THEIR RESPECTIVE RESOURCES AND POWERS ARE USED IN THE MOST EFFECTIVE AND EFFICIENT MANNER, HE SAID.

F

MR JACOBS SAID THE PROVISIONS OF THE BILL REGARDING THE POWERS OF THE SFC OVER THE EXCHANGES AND THE RESPECTIVE ROLES OF THE SFC AND THE EXCHANGES FOLLOWED VERY CLOSELY THE RECOMMENDATIONS OF THE SECURITIES REVIEW COMMITTEE, "EXCEPT THAT WE HAVE MADE PROVISION IN THE BILL FOR THE COMMISSION TO BE ABLE TO TRANSFER TO THE EXCHANGES CERTAIN FUNCTIONS ADDITIONAL TO THOSE ENVISAGED IN THAT REPORT."

"IT IS OUR INTENTION ᎢᎻᎪᎢ, AS AND WHEN THE TWO EXCHANGES DEVELOP THEIR ROLE AS SELF-REGULATORY ORGANISATIONS, AN INCREASED PART OF THE REGULATORY AND SUPERVISORY FUNCTION SHOULD BE DEVOLVED THEM.

TO

/"I INTEND