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FINANCIAL AND MONETARY AFFAIRS

meets half yearly to hold discussions in areas of common interest. The HKMA has also been playing an increasingly active role in international forums of banking supervision. These include participation in the Core Principles Liaison Group set up by the Basel Committee on Banking Supervision, the Offshore Group of Banking Supervisors, and the South East Asia, New Zealand and Australia (SEANZA) Forum of Banking Supervisors. In addition, Hong Kong is a member of the Financial Action Task Force (FATF), an inter-governmental body with the objective of developing and promoting legal, law enforcement and financial regulation policies to combat money laundering. The FATF membership is currently made up of 29 governments and two regional organisations. At the 12th Plenary Meeting of the FATF held in early October, Hong Kong was selected as President of the FATF for the period July 2001 to June 2002.

The Securities and Futures Commission

The Securities and Futures Commission (SFC) was established in May 1989 following enactment of the Securities and Futures Commission Ordinance (SFCO). This represented the first important phase in the overhaul of the regulation of the securities and futures market in Hong Kong and the implementation of one of the most important recommendations made by the Securities Review Committee in May 1988.

The SFCO transfers to the SFC the functions of the former Securities Commission, the Commodities Trading Commission and the Office of the Commissioner for Securities and Commodities Trading. It provides a general regulatory framework for the securities and futures industries, leaving certain elements to be covered by regulations, administrative procedures and guidelines developed by the commission. Established as an autonomous statutory body outside the Civil Service, the SFC has 12 directors (half of them executive) appointed by the Chief Executive of the HKSAR. It must present the Financial Secretary with its annual report, budget and an audited statement of its accounts, which are also required to be laid before the legislature.

The SFC seeks advice on policy matters from its Advisory Committee, which comprises three executive directors of the SFC and nine independent members. They are appointed by the HKSAR Chief Executive and are broadly based and representative of market participants and relevant professions. 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 also independently appointed by the HKSAR Chief Executive.

Over the years, the SFC has developed a framework of securities and futures regulation that is on par with internationally accepted standards.

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 eight years. Its budget for 2000-01 was $475 million and it had an establishment of 334 at year-end.

The SFC exercises prudential supervision over the securities, financial investment and futures industries in Hong Kong. It is divided into four operating divisions. Each division is headed by an Executive Director.

The Supervision of Markets Division is responsible for market oversight, in particular oversight of the operations of the HKEx, and its subsidiaries, namely the

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