SFC Releases 1995/96 Annual Report

SFC Chairman Anthony Neoh commented, "During the year under review, substantial strides were made by Hong Kong in market development, improvement of market integrity and protection of the interests of investors. The SFC is pleased to have contributed to these developments."

On the market development front, both the Stock and Futures Exchange moved forward on a number of important initiatives. The Stock Exchange launched its stock options market, commenced operation of off-trading floor terminals, and introduced major reforms to the short selling market including an increase in the number of stocks which may be sold short from 17 to 113. The Futures Exchange launched an electronic, off-floor, trading system for its one day rolling forex contract and announced a groundbreaking agreement with the Philadelphia Stock Exchange for the trading of foreign currency options in Hong Kong.

Hong Kong continued its strong growth as a fund management centre for the region. The number of authorised funds increased by 21% over the preceding year, bringing the total of authorised funds to 1,219, with a net asset value of over US$82 billion. The number of fund management firms in Hong Kong has grown to 87, representing the largest concentration of fund managers in Asia.

The SFC has worked with the two Exchanges and the industry in general to develop policy initiatives aimed at improving user confidence. To promote higher standards of corporate governance in Hong Kong, an SFC-Stock Exchange working group made amendments to the Listing Rules, following market consultation in 1995, to ensure more accurate and complete disclosure by directors of information necessary to assess their suitability.

To ensure that Hong Kong remains at the forefront of risk management, the SFC undertook during the year a survey of derivatives issuers, and is currently undertaking a second such survey to determine how it might further improve the risk management guidelines it issued last year. The Commission also convened an Intermarket Risk Management Committee in November 1995 to improve cross-market risk management efforts and to consider ways and means of monitoring cross-market linkages.

Market integrity has been enhanced by a determined enforcement programme, with an emphasis this past year on unregistered dealing and 'rat trading'. In addition to restriction notices issued and disciplinary actions taken against registered intermediaries, the SFC is in the process of putting forward proposals for tighter internal controls by intermediaries to help prevent recurrences of these and other malpractices.

The SFC's active participation in the International Organisation of Securities Commissions ("IOSCO") and its relations with regulatory agencies have facilitated cross-border enforcement and harmonisation of standards while helping to forge market linkages. During the year, the SFC signed regulatory agreements with the Commodity Futures Trading Commission and the Securities and Exchange Commission of the United States, the Investment Management Regulatory Organisation of the United Kingdom and the Securities and Exchange Commission in Taipei.

"In the coming year," said Mr Neoh, "our priorities will be to further improve risk management within firms and in the organised markets, to enhance our investigative expertise and surveillance capabilities, and to work with the industry to promote a culture of compliance."

For further information, please contact Bill Weeks or Chan Chi Keung at 2840-9287.