Hong Kong's SFC seeks to impose tighter investment regulations

Hong Kong's SFC seeks to impose tighter investment regulationsBy Channel NewsAsia's Hong Kong Correspondent Leslie Tang Posted: 30 November 2009 2308 hrs


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HONG KONG:

Hong Kong's securities regulator said on Monday that its responsibilities do not include taking risk out of the system, in the aftermath of the Lehman Minibond scandal. But to avoid a repeat of last year's fiasco, the Securities and Futures Commission (SFC) has proposed new investment regulations which are up for public consultation until end-December.
The Lehman Minibond saga rocked Hong Kong's status as an international financial centre. Many blamed the city's financial regulators for failing to prevent the fiasco.
A year later, the SFC is still on the defensive. Martin Wheatley, CEO of SFC, said: "If it's imposed on us, the burden of accessing risk for all of you and your clients and the man on the street, then you can assure yourselves that the product range that's available in Hong Kong will disappear, completely disappear. "It's not our job to take risk out of the system.
It's our job to make sure that features are properly disclosed and that intermediaries act according to a set of good principles, which are about acting in the interest of the investor." More than 30,000 Hong Kong investors bought about US$1.5 billion worth of the structured products, which became virtually worthless when Lehman went bust last September.
This sparked protests by mostly elderly investors who said they did not understand what they were buying and had lost their life savings in the process. To avoid a repeat of the debacle, the SFC is seeking to impose tightened investment guidelines. It is proposing clearer documentation on products, so investors are better informed.
The regulator has also suggested redefining categories of investors and banning the selling of complicated products with derivatives to regular "retail" investors.
Another proposal is a "cooling off" period during which investors can back out of their investments, but they must pay a penalty fee. Members of the public have up to the end of December to give their feedback on the SFC's proposals. If the market endorses the consultation paper, the new rules could be implemented next year.
- CNA/so