TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 31

Comment or recommendation

is a fit and proper person to hold office."

11. Paragraph 6.81 "We therefore recommend that the Articles and Rules of the Exchange should be amended to vest appropriate powers in a Chief Executive Officer."

12. "We further recommend that the SC must

be satisfied that the Chief Executive is a fit and proper person to hold office and that his terms of appointment give him appropriate authority and independence."

13. Paragraph 6.82 "We recommend that

within the next year the OCS/New SC should conduct an audit of the management and departmental structure and financial position and controls at the HKFE."

14. Paragraph 6.87 "We therefore recommend

that (a) all shareholders of the HKFE should be required to apply for HKFE Membership; if an existing shareholder has his Membership application refused he should be given a period to dispose of his holding (b) that before authorising a firm the new SC should be satisfied that it will be properly

Action taken by the HKFE

the Board. we have presumed that it was the intention of the Committee that the Securities Commission would satisfy itself as to matters relating to the independent directors principally by vetting the Articles of the Exchange; the Articles provide (Article 68) for consultation with the Commission. Article 84 contains a number of provisions relating to the Chief Executive, including in Article 84(b) a provision that he should be approved by the Commission as fit and proper person.

а

Article 85 provides expressly for the Chief Executive to have exclusive conduct of day- to-day management and for the necessary executive powers to be delegated to him.

Article 84 (d) provides for the Commission's approval of the Chief Executive as a fit and proper person. The provisions of Article 84 are designed to protect the Chief Executive's authority and independence. Article 84(g) provides that the contract of employment between the Company and the Chief Executive shall reflect the provision of Article 85.

This is a matter outside the control of the Exchange. But it will be taken up by the OCS/SFC when it is established.

In

The Exchange Company is a company limited by shares. practice this is a highly unsuitable vehicle for a membership organisation. One of the particular difficulties in this regard arises in connection with a requirement that Members dispose of their

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