ENG-1998 — Page 114

FINANCIAL AND MONETARY AFFAIRS

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exchanges. Its budget for 1998-99 was $413 million and it had an establishment of 311 at year's end.

The SFC has developed a framework of securities and futures regulation that is on par with internationally-accepted standards. In addition, it has published various codes of conduct and guidelines regulating market conduct and criteria for approval of investment products and licensing of market intermediaries.

Dealers in securities, investment advisers, commodity dealers and commodity- trading advisers, leveraged foreign exchange traders and their representatives have to register with the SFC. The criteria for registration are stipulated in the Securities Ordinance, the Commodities Trading Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and the Securities and Futures Commission Ordinance. At the end of 1998, the SFC registered 21 563 persons, of whom 581 were corporate securities dealers and 161 were commodities dealers. Among them, 326 were from

overseas.

As regards the regulation of Leveraged Foreign Exchange trading, the SFC had issued 17 foreign exchange trade licences as well as 1010 licences for their representatives by the end of 1998.

Insider Dealing Tribunal

The Insider Dealing Tribunal is an important feature of the regulatory framework in Hong Kong. Established under the Securities (Insider Dealing) Ordinance, the tribunal looks into cases involving suspected insider dealing referred to it by the Financial Secretary. Since it commenced operation in 1994, the tribunal has successfully concluded eight cases, three of them in 1998. In order to ensure that there is sufficient number of eligible candidates for the appointment as the chairman of the tribunal, the Ordinance was amended to extend the eligibility to also deputy and former deputy judges of the Court of First Instance.

Office of the Commissioner of Insurance

The Commissioner of Insurance, appointed as the Insurance Authority (IA), exercises prudential supervision over the insurance industry in Hong Kong under the Insurance Companies Ordinance (ICO).

The ICO, which prescribes a comprehensive regulatory framework for all classes of insurance business, has two main objectives for the protection of policy holders. Firstly, it aims at ensuring the financial stability of all insurers authorised in Hong Kong. Secondly, it aims at ensuring the fitness and propriety of the management of an insurer. These objectives are achieved through the prescription of, inter alia, the minimum share capital and the solvency margin requirements, and the requirement for directors and controllers of insurers to be fit and proper persons.

A general business insurer is required to maintain a minimum solvency margin which is calculated on either the amount of its premium income or claims outstanding, whichever is the greater. It is also required to maintain assets in Hong Kong to meet the claims of Hong Kong policy holders in the event of its insolvency, which is particularly important when the insurer is involved in cross-border insolvency proceedings. The solvency margin required of a life insurer, however, is calculated on the amount of the insurer's mathematical reserves and capital at risk.