ENG-2002 — Page 125

FINANCIAL AND MONETARY AFFAIRS

In a bid to further strengthen communication and enhance cooperation, the SFC had regular meetings with the China Securities Regulatory Commission (CSRC), the two exchanges in Shanghai and Shenzhen, and the HKEx to discuss issues of mutual interest.

Initiatives to Enhance Hong Kong's Competitiveness

The Government is determined to maintain and strengthen Hong Kong's status as a leading international financial centre. For this purpose, a Financial Market Development Task Force was set up in December 2001 to provide a high-level forum to coordinate new initiatives in promoting the development of Hong Kong's financial markets. The Task Force brings in expertise and professional input from the regulators and market participants, and reports progress to the Financial Secretary from time to time.

The individual regulators will continue to further enhance Hong Kong's regulatory framework in the light of international experience and standards. The objective is to have an effective regulatory framework that will ensure sound business standards and confidence of the market but without unnecessary impediments of a bureaucratic or fiscal nature.

Major initiatives to enhance Hong Kong's competitiveness as an international financial centre are outlined in the following paragraphs.

Securities and Futures Ordinance

The SFO, the bill for which was passed by the Legislative Council on March 13, consolidates and modernises 10 ordinances governing the securities and futures markets into a composite piece of legislation, to keep the regulatory regime on a par with international standards and practices. It seeks to facilitate development of a fair, orderly and transparent market to promote market confidence; secure appropriate investor protection; reduce market malpractice and financial crimes; and facilitate market innovation and competition. The commencement of the SFO, targeted on April 1, 2003, will enhance Hong Kong's position as an international financial centre and the premier capital formation centre for the Mainland. By year-end, the making of the 40 sets of subsidiary legislation necessary for the SFO to commence was at the final stage.

Main features of improvement under the new regulatory regime include:— (a) greater accountability of the SFC;

(b) streamlined and enhanced regulation of market intermediaries and levelling the playing field between brokers and banks in their conduct of securities business and other regulated activities;

(c) facilitating market innovation;

(d) greater effectiveness in combating market misconduct;

(e) greater market transparency;

(ƒ) enhanced investor compensation arrangements; and

(g) provision of a responsive regulatory framework through prescribing the detailed

and technical regulatory requirements in subsidiary legislation.

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