ENG-2006 — Page 108

80 Financial and Monetary Affairs

In April 2006, the SFC released the consultation conclusions on Proposed Measures to Address Risks Arising from Securities Margin Financing. The proposed measures aimed to offer greater protection for investors through reducing the risks. arising from the provision of securities margin financing, controlling the amount of margin clients' securities that can be re-pledged by securities margin finance providers and improving the transparency of securities margin finance providers' operations. The proposed measures became effective on October 1, 2006.

In 2006, the SFC continued its rigorous supervision of licensed intermediaries and identified three cases of misappropriation of client assets by brokers. In each of those cases, the SFC took swift and decisive action to protect the interests of investors, such as imposing appropriate prohibition on the broker and applying to the Court for appointment of an independent administrator to take over the control of the broker's operations. The SFC also worked closely with the administrator of one of these brokers and a white knight to facilitate reaching an agreement between the administrator and the white knight to take over the broker. The agreement facilitated the return of all client assets to the clients.

In addition, the SFC continued to focus its enforcement resources on fighting market misconduct and intermediaries who are dishonest or put clients at risk. By year-end, there were 22 outstanding investigations of listed companies. During the year, the SFC successfully prosecuted 10 entities for market manipulation and false or misleading disclosure and summonses were issued to an additional two entities but those cases were not concluded by year-end. In the previous year, there were five successful prosecutions and six outstanding cases. There were 16 referrals to the Police and the Independent Commission Against Corruption (ICAC).

Insurance Sector

Main Features

At year-end, there were 181 authorised insurers, 91 of which were incorporated in Hong Kong while the remaining 90 were incorporated on the Mainland and in 21 overseas countries, with the United States taking the lead.

The total gross premiums of the insurance industry reached $137 billion in 2005, representing 13.2 per cent growth over 2004. However, gross premiums of the general insurance sector slightly decreased by 1.4 per cent to $22.5 billion in 2005, with general liability continuing to register a double digit percentage decline due to keen competition in employees' compensation business. Overall underwriting performance improved from a profit of $2.22 billion in 2004 to $2.50 billion in 2005.

The long-term insurance business continued to attain double-digit annual growth from 1991 to 2005, with office premiums increasing by 16.6 per cent to $114.8 billion in 2005. The individual life business remained dominant with the office premiums in force of $98.2 billion, accounting for 85.6 per cent of the total office premiums. The number of individual life policies in force grew by 8.9 per cent to 6.6 million in 2005.