| Date | Context | Summary of development | Action
|
|---|
| 5.2.01
| FA
| The Panel was updated on the implementation of the new Financial Resources Rules (FRR) made under the then Securities and Futures Commission Ordinance (Cap. 24) since the commencement of FRR on 12 June 2000. [Paper] In response to members' request, the Administration provided after the meeting supplementary information on the details of three FRR modifications granted by the Securities and Futures Commission (SFC) in the light of special circumstances of the business of the applicants concerned. [Follow-up Paper]
Members expressed concern about the assistance provided by SFC to intermediaries in complying with the risks concentration rules under the new FRR as well as assistance to accounting professionals in compiling FRR returns.
|
|
| 6.5.02
| FA
| The Panel discussed the paper on the proposed amendments to the FRR. [Paper] The purpose of the amendments was to reduce the financial risk posed to a firm's clients as a result of the firm's own aggressive lending and funding practices. The proposed amendments included the followings:
| (a) | To apply a 80% haircut on certain stocks and warrants pledged with securities margin financiers and brokerage firms as margin collateral; and
| | (b) | To include in a firm's ranking liabilities the amount of its total borrowings secured by re-pledging margin clients' securities that is in excess of 65% of the total amount of loans extended to margin clients.
|
Members suggested that SFC should review the arrangement for firms to pool and re-pledge clients' securities and consider the need to tailor regulatory capital requirements on firms based on the risk levels of their businesses. The Administration and SFC undertook to review the capital regulatory framework for brokers.
|
|
| 7.7.03
| FA
| The Panel discussed the paper on the review on the Financial Regulatory Framework for Securities Dealers and Securities Margin Finance Providers. [Paper][Speaking notes]
Further to the Panel meeting on 6 May 2002, SFC had formed a Working Group to take forward the review upon members' request. The findings and recommendations of the Working Group were as follows:
| (a) | It was international practice to require brokers to be well capitalized and the capital level should be commensurate with their risks;
| | (b) | On pooling and re-pledging client collateral, it was international best practice to segregate non-borrowing margin client collateral;
| | (c) | The present capital requirements for share margin finance providers engaged in re-pledging should be strengthened; and
| | (d) | Margin clients should be better informed regarding the re-pledging of the securities collateral. SFC should be requested to step up investor education on the risks of pooling and re-pledging.
|
Members considered that the international practice of capital requirements for brokers might not be applicable to Hong Kong due to different market conditions. In view of the then difficult market condition, some members suggested that the introduction of risk control measures would be more appropriate than reform measures. Moreover, views from clients of small and medium sized brokers should be considered.
|
|
| 1.3.04
| FA
| The Panel was briefed on the Working Group's recommendations in respect of the financial regulatory framework for licensed corporations. [Paper],[Presentation]& [Speaking notes]
Taking into account members' views expressed at the meeting on 7 July 2003, the Working Group had put forward major recommendations as follows:
| (a) | To impose a "re-pledging limit" for addressing pooling risk;
| | (b) | To increase the haircut percentage rates prescribed in FRR to encourage securities margin finance (SMF) providers to adhere to prudent lending ratios;
| | (c) | To amend the Code of Conduct to require greater disclosure regarding SMF activities; and
| | (d) | To step up investor education.
|
The Panel noted that SFC intended to conduct market consultation in the second quarter of 2004 and consult LegCo Members on the draft legislative amendments in the 2004/05 legislative session.
Members welcomed the proposed core measures. Some members considered it inappropriate to allow SMF providers to re-pledge clients' collateral. In order to achieve complete segregation of non-borrowing margin clients' collateral so as to meet international standards, SFC would explore with the market the possible means to improve the present infrastructure to facilitate segregation of clients' collateral.
|
|
| 17.12.04
| FA
| The Panel was briefed on the responses received on the public consultation conducted in September 2004 on the following proposed measures to address risks arising from SMF:
| (a) | imposing a limit on the re-pledging of margin clients' collateral ("re-pledging limit"); and
| | (b) | adjusting the haircut percentages applied to margin clients' collateral under the Securities and Futures FRR.
|
SFC will continue discussion with the brokerage industry to identify the most suitable measures for reducing risks of SMF. It plans to finalize the measures and issue rule amendments in 2005. [Paper] [Background brief]
|
|
| 19.10.05
| CQ
| Hon Albert CHENG raised a question on regulation of the warrants market. [Hansard "page 77"]
|
|
| 5.1.2006
| FA
| The Panel was briefed on the review of derivative warrants market. [Paper] [Background Brief] [Paper prepared by the Legal Service Division of the LegCo Secretariat] [Report issued by SFC] [Speaking note]
In response to members' request, SFC provided supplementary information on the derivative warrants market. [Follow-up Paper]
|
|
| 6.2.2006
| FA
| The Panel was briefed on SFC's progress report on proposed measures to address risks arising from securities margin financing. SFC advised that it had conducted a number of meetings with brokers associations in 2005 and studied the viability of complete segregation of borrowing and non-borrowing margin clients' collateral. While SFC supported segregation as a long-term goal, SFC considered adopting a re-pledging limit for clients' collateral in the short to medium term.
SFC would consult the brokerage industry on the proposed re-pledging limit and assess further the viability and impact of implementing complete segregation. It would seek to conclude the consultation and put in place a re-pledging limit and other measures as soon as possible. [Paper] [Background Brief] [Speaking note]
In response to members' request, SFC provided supplementary information on the proposed measures to address risks arising from securities margin financing. [Follow-up Paper]
| A
|
| 17.5.06
| -
| SFC issued three LegCo Briefs respectively for the following items of subsidiary legislation tabled at the LegCo meeting on 24 May 2006:
| (a) | Securities and Futures (Financial Resources) (Amendment) Rules 2006
The Amendment Rules amend FRR to raise certain FRR haircut percentages, relax certain existing FRR requirements, provide for the proposed paid-up share capital requirements for sponsors and make consequential changes; and [LegCo Brief] [Paragraphs 35 to 39 of Legal Service Division Report]
| | (b) | Securities and Futures (Client Securities) (Amendment) Rules 2006
The Amendment Rules amend the principal Rules for the purpose of imposing a repledging limit on intermediaries licensed for dealing in securities or securities margin financing. The repledging limit applies when an intermediary or an associated entity of such intermediary repledges securities collateral of the intermediary; [LegCo Brief] [Paragraphs 40 to 43 of Legal Service Division Report]
| | (c) | Securities and Futures (Contract Notes, Statements of Account and Receipts) (Amendment) Rules 2006
The Amendment Rules amend the principal Rules to impose additional disclosure requirements in monthly client statements on any intermediary which is licensed for securities margin financing or dealing in securities where such intermediary or an associated entity of such intermediary has repledged securities collateral. [LegCo Brief] [Paragraphs 44 and 45 of Legal Service Division Report]
|
|
|
| 29.9.06
| FA
| The Panel discussed with the Administration and SFC issues relating to the regulation of securities firms in the light of three recent cases of broker misconduct. [Letter from Hon SIN Chung-kai] (Chinese version only) [Paper] [Presentation material]
To address members' concerns, the Administration and SFC provided supplementary information on the regulation of securities firms. [Follow-up paper]
The Process Review Panel for SFC provided a written response to the Panel's request to review the three cases of broker misconduct [Follow-up paper] [Follow-up paper] [Follow-up paper] [Follow-up paper] (English version only)
|
|
| 16.10.06
| FA
| At the meeting when the Panel discussed the policy initiatives of the Financial Services and the Treasury Bureau featuring in the Chief Executive's 2006-2007 Policy Address, members requested the Administration to liaise with SFC for providing the Panel with a progress report on the proposals put forward by SFC in November 2005 for strengthening the existing regulatory framework following its comprehensive review of the derivative warrants market. [Follow-up paper]
|
|
| 28.10.09
| CQ
| Hon LAU Kong-wah raised a question on sale of investment funds by financial services companies. [Hansard "page 29"]
|
|
| 12.5.10
| CQ
| Hon Paul CHAN Mo-po raised a question on operation of charitable organizations and funds. [Hansard "page 9"]
|
|
| 8.12.10
| CQ
| Hon LEUNG Kwok-hung raised a question on regulation of credit reference agencies. [Hansard "page 91"]
|
|
| 7.12.11 |
CQ |
Hon Frederick FUNG Kin-kee raised a question on regulation of credit rating agencies in Hong Kong. [Hansard "page 190"] |
|
