Regulators can stop repeat of minibond debacle with risk rating system

Britain's incoming financial regulator has recognized shortcomings in its regulatory tradition where supervisors keep an eye on sellers rather than the products that they offer the market (UK's new financial regulator vows to step in fast to stop mis-selling, May 12). Martin Wheatley admits product regulation will be inevitable.

Since the eruption of the Lehman Brothers minibond debacle, the Hong Kong Securities and Futures Commission (SFC) has maintained it is the responsibility of the selling intermediary to determine whether products are suitable to the investor. Mr Wheatley, the outgoing chief executive of the SFC, appears to have had an epiphany on the road to London.

The commission and/or the Hong Kong Monetary Authority must similarly have an obligation to the public to accredit a risk-to-capital warning for all investment products sold in this jurisdiction.

A standard rating system grading risk to capital on a scale of one to 10 would not be difficult to implement. Many investment companies already grade their products by risk, and the industry could be required to make an annual submission of its own risk assessment for all investment products that it wishes to sell in Hong Kong for the regulator's vetting and accreditation.

Our regulators should not forgo this responsibility as it will protect the public by making them aware of their exposure to capital risk, and will also protect the financial industry from future claims of mis-selling and misrepresentation.

Our officials at the SFC and the Monetary Authority are the highest-paid regulators on the planet, and they should regulate in the public interest - after all, it is the Hong Kong public which pays their handsome salaries.

Roger Emmerton, Wan Chai