TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 184

Major criticisms

1.6.

We found

that,

while

the entire system had

originally been based on self-regulation by the Exchanges with "the support of an authoritative and impartial body to assist them in taking action themselves to curb questionable

practices"(6)

the

concept

of

market self-discipline had failed to develop in Hong Kong. What is equally unfortunate is that, faced with this, the supervisory bodies charged with overseeing the markets had lost effective control.

self-regulation

1.7.

and

While our terms of reference required us to prepare a blue-print for the future rather than to allocate blame, it proved to be inevitable that our review would highlight defects in the past arrangements. These defects

came to our attention through submissions we received and discussions we held. We did not consider it part of our role to investigate in any detail but they were sufficient for us to form the view that major reforms were called for. In our view, they may be summarised as follows :

(a) at the Stock Exchange of Hong Kong, which

had opened in April 1986 after the unification of four smaller exchanges, an

inside group treated the Exchange as a private club rather than a public utility

for the general benefit of members,

and issuers. Its executive staff

ineffective, lacking adequate

investors

was

(6)

Statement by the then Financial Secretary, Sir Philip

Haddon-Cave, in the

1973, announcing Advisory Council, Commission.

the

the

Legislative Council on 3 January establishment of the Securities fore-runner of the Securities

3