TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 29

Comment or recommendation

express terms that it is a non-profit making company.

11

!

5. Paragraph 6.72 "We therefore recommend

that the Articles of Association of HKFE should be amended to require that the Board be broadly based and representative of the market, users of the market and the public interest and that the Board should incorporate (a) eight Full Market Members elected from the Membership of the Exchange (b) four Independent Members with full voting rights co-opted by the Board and (c) the Chief Executive ex officio."

6.

Paragraph 6.73 "We recommend that at least one General Clearing Member, one Independent Clearing Member, one Non- Clearing Member and one Floor Member should serve on the Board."

be paid.

Action taken by the HKFE

It has been found

impossible to include a

statement that the Company is a non-profit making organisation, as this is not true.

The

Company is intended to be a profit-making body; indeed, it is essential that the Company is a profit-making body if the Exchange is to stay in business and to flourish in future. The Exchange views the point as being that all profits should be reinvested in the Exchange for the benefit of the Exchange and of all Members as a whole. The Exchange should not be viewed as a body in respect of which any third party has made an investment on which it may expect a return. This is in keeping with the provisions relating to dividends. See Articles 113, 114 and 115.

Article 66 reflects the desired composition of the Board in accordance with this recommendation.

This recommendation was made, obviously, at a time when the SRC could not have known of the Exchange's intentions regarding categories of Membership. Article 67 has been drafted in the light of the new categories and reflects this recommendation in general terms. It is felt that to be too specific may lead to the letter of the Article being followed to the exclusion of the spirit of the Article.