TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 2

А

,

SRC Report.

In summary it believes that the Exchange was run by "an inside group (who) treated the Exchange as a private club rather than a public utility for the general benefit of members, investors and issuers". To address this shortcoming, the SRC proposes, inter alia, that the SEHK be governed by a broadly-based Council of 22, with the day-to-day operations being headed by a Chief Executive. Details of the SRC recommendations are summarised in Annex A.

Transitional Measures

5

The SRC also believes that, in order to ensure the SEHK is free of undue domination of certain interest groups, the Government should play an important role at the initial stages of the reform. It recommends that, as a transitional measure, the first five independent members of the governing Council, the first Nominating Committee and the first scrutineers be appointed by the Governor (paragraph 4.67 of the SRC Report at Annex A).

SEHK's response

6

the

own

to

Following the publication of the SRC Report, Management Committee of the SEHK has initiated

initiated its action to restructure the constitution of the Exchange in the

of light

the SRC recommendations. They wish concentrate at the present stage on changes in the committee structure leading to the formation of the type of Council envisaged by the SRC. To attract the necessary support from members,

seek they

certain modifications

the from

SRC recommendations. They propose that while the first Council would be constituted in accordance with the spirit of the SRC recommendations, this would not involve a Nominating Committee. Instead, all members proposed for election or appointment to the Council, including the chairman, would be appointed by the Council with the prior approval in writing by or on behalf of the Governor.

7

The Management Committee of SEHK also pledges that of 75% of every effort will be made to secure the support its members to vote at an extraordinary general meeting (EGM) on 20 July in favour of these changes to be embodied in the revised Memart at Annex B. They plan to proceed on the basis of the timetable at Annex C which, if successfully implemented, will have the Council in place on 1 October

1988.