TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 6

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There has been no formal consultation since the SRC Report has been published but the Financial Secretary called for public comments before 4 July 1988. Those comments on the regulatory body are summarised at Annex E.

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The press has also come out generally in favour of setting up the new regulatory body although there are some reservations on its accountability, powers, functions

powers, functions and the proposed composition of its governing board and AC. These are also summarised at Annex E.

Public Reaction

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The establishment of a single, independent regulatory authority for the securities and futures industries has generally been welcomed by the Exchanges and the investing public. An early positive response from the Administration that it will implement the SRC recommendation would indicate the Government's commitment to improving market regulation and would go some way towards restoring confidence in the markets, especially among overseas institutional investors who were critical of

of the events of last October. Some aspects of the proposals, however, such as exclusion of the Exchanges from the AC, and the level of the transaction levy, could be controversial or at least stimulate some debate. Nevertheless, any opposition to the proposals would more likely come from groups whose interests might be affected, such as the Hong Kong Stockbrokers Association, the OCS staff and members of the Exchanges, than from the general public.

Publicity

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Subject to Members' approval of the recommendations in this memorandum on 12 July 1988, staff of the OCS will be advised of the decision in advance of its publication as will the Chairman of the two Exchanges and the SC and CTC, and the relevant LegCo Ad Hoc Group.

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A press conference chaired by the Financial Secretary will be held on the afternoon of the same day at which he will announce the Government's acceptance of the

the SRC's principal proposals for the establishment of the SFC. This will be followed by special briefings the following day for both overseas and local financial correspondents to update them on the progress of reforms, including those being undertaken by the two Exchanges.