TNAG-2306-FCO40-3340-Future-of-Hong-Kong-stock-market-and-exchange-rate-1991 — Page 31

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XCCI(91)42 Copy No.

NOTE FOR EXECUTIVE COUNCIL

GOVERNANCE OF THE STOCK EXCHANGE OF HONG KONG LIMITED

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INTRODUCTION

The purpose of this Note is to brief Members on the situation following the recent failure of the Stock Exchange of Hong Kong Limited (SEHK) to pass the compromise package to reform the composition of the SEHK Council and the processes by which it is elected.

BACKGROUND

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At an Extraordinary General Meeting of the SEHK held on 19 August 1991, the compromise package of reforms which the Securities and Futures Commission (SFC) and the SEHK's Executive Committee and Council reached following nearly six months of discussions, failed to secure the 75% majority vote necessary to enable it to be passed although it was supported by a majority of the members i.e. 306: 247.

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As the SFC regards the reforms as vital to the development of the market, the latter decided on 20 August 1991(1) to exercise its powers under section 50 of the Securities and Futures Commission Ordinance (Chapter 24) to request the SEHK to amend its constitution to bring about the necessary reforms. The requested amendments are similar to the compromise package except in two respects: the composition of the Council and the

(1) Given the procedures prescribed in section 50 of the Securities and Futures Commission Ordinance and those governing Council elections in the SEHK's Articles, a lead time of 133 days is required to ensure that this year's elections are held in accordance with the amended Articles. It was thus necessary for the SFC's formal request to be issued immediately after the SEHK's EGM in order to ensure that the amendments are in place before this year's Council elections.

Executive Council