ENG-1974 — Page 61

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FINANCIAL STRUCTURE

The existing four stock exchanges became members of the newly constituted Hong Kong Federation of Stock Exchanges. The ordinance established a Securities Com- mission and provided for the appointment of a Commissioner for Securities who has a wide range of responsibilities in connection with dealings in securities and, in particular, is responsible for the registration of dealers and their representatives, as well as investment advisers and their representatives. The ordinance made detailed provisions with respect to dealers' accounts and records, and established a stock exchanges compensation fund to compensate persons who suffer pecuniary loss as a result of default by stock brokers. The Commissioner for Securities has the power to inspect dealers' books and provision is also made for investigations by inspectors appointed by the commission.

The Council of the Hong Kong Federation of Stock Exchanges held its first meeting in July 1974. The stock exchanges compensation fund was formally establish- ed in August and nearly $24 million was received from the four stock exchanges and was invested.

Part VI of the ordinance and the Securities (Dealers, Investment Advisers and Representatives) Regulations 1974 requiring all dealers (whether or not they are members of the stock exchange), investment advisers and their representatives to register with the Commissioner for Securities were brought into force on October 1. At the end of the year more than 2,300 applications had been received and were being processed, including about 1,200 for registration as dealers, 60 as investment advisers, 1,000 as dealers' representatives and 70 as investment representatives.

During the year the total turnover reported in the exchanges was-Hong Kong Stock Exchange $2,445.63 million; Far East Exchange $5,049.35 million; Kam Ngan Stock Exchange $3,136.86 million; Kowloon Stock Exchange $701.37 million-a total of $11,333.21 million, a decrease of 77 per cent over the previous year's figure.

There was one public offer and three placements of shares, and at the end of the year the shares of 306 companies were listed on the four stock exchanges.

A feature during the year was the increased attention focussed on takeovers and mergers of companies, and the Securities Commission drew up a code of conduct for companies involved in takeovers. At the end of the year the commission also appointed a committee with representatives of the Hong Kong Federation of Stock Exchanges, the Exchange Banks Association, underwriters and others, to supervise all takeovers and mergers.