ENG-1990 — Page 96

FINANCIAL AND MONETARY AFFAIRS

72

investment advisers and other intermediaries and provide for the investigation of suspected malpractice and the maintenance of a compensation fund to compensate clients of de- faulting brokers.

The Protection of Investors Ordinance prohibits the use of fraudulent or reckless means to induce investors to buy or sell securities, or to induce them to take part in any investment arrangement in respect of property other than securities (the latter being controlled by the Securities Ordinance). It regulates the issue of publications related to such investments by prohibiting any advertisement inviting investors to invest without the advertisement first being submitted to the commission for authorisation.

The Commodities Trading Ordinance, together with the Securities and Futures Com- mission Ordinance, provides a regulatory framework within which the Futures Exchange operates and dealers, commodity trading advisers and representatives conduct their busi- ness. It includes provisions for the registration of dealers and their representatives and the maintenance of a compensation fund to compensate clients of defaulting commodity dealers.

The Office of the Commissioner of Insurance exercises prudential supervision of the insurance industry in Hong Kong. It administers the Insurance Companies Ordinance which brings all classes of insurance business under a comprehensive system of regulation and control by the Commissioner of Insurance (Insurance Authority). Conducting in- surance business in or from Hong Kong is restricted to authorised companies, to Lloyd's, and to certain underwriters approved by the Governor in Council. All new applications for authorisation are subject to careful scrutiny by the Insurance Authority to ensure that only insurers of good repute who meet all the criteria of the ordinance are admitted. The ordinance stipulates minimum share capital and solvency requirements for all authorised insurers and requires them to submit financial statements and other relevant information to the authority annually. It provides that any person who is not considered by the authority to be a fit and proper person to be associated with an authorised insurance company cannot acquire a position of influence in relation to such company. It also empowers the authority to intervene in the conduct of the business of insurance companies in certain circumstances. Where the authority has cause for concern, it may take remedial or precautionary measures to safeguard the interests of policy holders and claimants, in- cluding the limitation of premium income, the restriction of new business, the placing of assets in custody and petitioning for winding-up the company involved.

Self-regulatory measures to strengthen discipline in the insurance market have been formulated by the insurance industry after consultation with the government. The measures comprise the adoption by the insurance industry in 1989 of two Statements of Insurance Practice governing the writing of insurance contracts for long term and general insurance business, and the establishment in February 1990 of an Insurance Claims Complaints Bureau which provides an independent avenue for resolving claims disputes arising from personal insurance policies. Proposals for the self-regulation of insurance intermediaries (i.e. agents and brokers) are also under consideration. The self-regulatory system will benefit Hong Kong as a developing international insurance centre.

The Securities and Futures Commission

The Securities and Futures Commission (SFC) was established on May 1, 1989, following enactment of the Securities and Futures Commission Ordinance. The enactment of the