The Securities and Futures Commission is an independent statutory body that regulates the securities and futures markets in Hong Kong. Its leading role is to protect the investing public by maintaining a fair, orderly, and transparent market. The SFC also promotes investor education and ensures continued market development.
Hong Kong created the SFC in 1989 to regulate the local securities and futures markets. The government established the SFC in response to the global stock market crash in 1987. During that crash, the Hong Kong Stock Exchange suffered heavy losses. It highlighted the need for a dedicated regulator to oversee the securities and futures markets and protect investors. The SFC received further strengthening in 1997 after the Asian financial crisis.
A Chairman heads the SFC, and it has a 15-member Commission. It also has a 100-strong executive team, which is responsible for carrying out its regulatory functions.
The SFC focuses on protecting the best interests of consumers or investors. It also establishes guidelines that preserve the integrity of the market. These are some of the roles it undertakes to accomplish this:
Some market regulators focus on protecting the market, the economy, and the businesses. Meanwhile, others focus on consumer protection. SFC is one of the regulatory bodies that prioritizes investors or consumers. This can often mean stricter requirements for businesses.
It’s easy to focus on the tradeoffs of stricter guidelines, but there are some benefits for all parties involved:
Looking at the structure of the SFC makes it easier to understand the extent of the powers granted to it. While it does operate as an independent entity, it is also a branch of the Hong Kong government. This gives it far-reaching capabilities, especially after the bolstering it received following the 1997 financial crisis:
Despite being an arm of the government, the SFC receives no government funding. Instead, its budget comprises fees from the industry. Financial independence from the government improves impartiality and reduces the ability of government agents to interfere in the market.
These are some of the entities paying fees to the SFC:
As a regulated financial institution, there are strict requirements for maintaining and retaining communication records. The SFC has published guidance on this, including the following criteria:
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