ENG-1996 — Page 118

FINANCIAL AND MONETARY AFFAIRS

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structure comprising a Panel of Specialists and an Advisory Board with a view to ensuring that the MPF System will be effective in serving the best interest of the community. Panel members, working in six specialist groups, offer expert advice on technical matters and the advisory board provides advice on policy and strategic issues.

The government's policy is to achieve a high degree of security of retirement protection through an effective system of prudential regulation and supervision. During 1996, the MPF office made good progress in developing detailed proposals for the regulations and rules to be promulgated. Proposals were finalised on major issues, including the registration of schemes, standards for and operation of the registered schemes, the regulation and supervision of MPF approved trustees, the setting of investment standards and guidelines, and interface arrangements for existing voluntarily established occupational retirement schemes. In the process, the MPF office consulted interested parties including employer groups, labour unions and other organisations on relevant subjects in the proposed system. The target is to complete the draft subsidiary legislation in early 1997.

The Securities and Futures Commission

The SFC was established in May 1989 under the Securities and Futures Commission Ordinance. The SFC took over the functions of the former Securities Commission, the Commodities Trading Commission and the Office of the Commissioner for Securities and Commodities Trading.

The SFC is an autonomous statutory body outside the civil service. It has 10 directors (half of them executive) who are appointed by the Governor of Hong Kong. The commission is required to present the Financial Secretary an annual report and an audited statement of its accounts, which are laid before the Legislative Council. The commission seeks advice on policy matters from the SFC Advisory Committee, the 12 independent members of which are appointed by the Governor and are broadly representative of market participants and relevant professions. SFC decisions relating to matters concerning the registration of persons and intervention in their business are subject to appeal to the Securities and Futures Appeals Panel, the members of which are independently appointed by the Governor.

The SFC is funded largely by the market and partly by the government, although no funding has been sought from the latter in the past four years. The market contribution is in the form of fees and charges for specific services and functions. performed, plus a statutory levy on transactions recorded on the stock and futures exchanges. Its budget for 1996-97 was $266 million and it had an establishment of 256 at the year's end.

The SFC has developed a framework of securities and futures regulation that brings Hong Kong into line with internationally-accepted standards. In addition, the SFC has published various codes of conduct and guidelines regulating market conduct and criteria for approval of investment products and licensing of market intermediaries. Securities transactions on the stock exchange are executed by the Automatic Order Matching and Execution System. In January 1996, SEHK members commenced trading via a second terminal located in their own offices which supplements those terminals already available on the trading floor. It has greatly enhanced order entry