Fidelity Insurance for Exchange Participants

The SFC is pleased to announce that an industry working group has decided on the appointment of a new insurance broker to arrange and administer the fidelity insurance schemes covering exchange participants for the year from 1 April 2006 to 31 March 2007 (Note 1).

Same as previous year’s arrangement, there will be two insurance policies respectively covering the participants of the Stock Exchange of Hong Kong Limited and the participants of the Hong Kong Futures Exchange Limited against their financial losses due to fidelity risks arising from their dealing activities. As provided under the Securities and Futures (Insurance) Rules, each stock exchange participant or futures exchange participant will be insured for an indemnity limit of $15 million per scheme period with a deductible amount of $3 million per claim/loss (Note 2).

Through a rigorous tender process, proposals from the insurance market were obtained and scrutinised by the industry working group. With the insurance coverage remaining unchanged, stock exchange participants will be paying 10% less and futures exchange participants will be paying 20% less in gross premiums compared to last year as a result of the competitive tender. SFC’s Executive Director of Intermediaries and Investment Products, Mrs Alexa Lam, said: “The SFC is pleased to see the concerted efforts of the industry in securing the best deal for itself. The maintenance of fidelity insurance by exchange participants is crucial to their financial soundness, thereby providing better protection to investors and enhancing market stability.”

Ends

Notes:

1. For the purposes of arranging the master policies of insurance covering the licensed corporations concerned, an industry working group, which comprises the following members, was formed:

(i) Mr Anthony Espina (Chairman of the industry working group)
(ii) The Institute of Securities Dealers Limited
(iii) Hong Kong Stockbrokers Association Limited
(iv) Hong Kong Securities Professionals Association
(v) BOCI
(vi) DBS Vickers
(vii) KGI Group
(viii) Linklaters (on behalf of Goldman Sachs (Asia) LLC and Citigroup Global Markets Asia Limited)
(ix) Merrill Lynch
(x) Morgan Stanley.

2. “Deductible amount” in relation to a policy of insurance means the amount of any loss or claim that an insured corporation must itself bear.