SFC Quarterly Report (2Q/2008)

Last week SFC released the first Quarterly Report for the second quarter of 2008 to enhance its transparency and accountability of its operation. The following activities of SFC during this quarter highlighted in the Report are remarkable:

• SFC is concentrating on completing investigations within 7 months and it did so in 76% of all completed investigations. It seems that Enforcement has become more efficient now.
• SFC has sent a strong message to deter market misconduct. It used all the tools available to tackle insider dealing (e.g. sought an interim worldwide injunction to freeze assets of suspected insider dealers in one case).
• SFC has encouraged good compliance and deterred wrongdoing by reaching agreements with ICEA and Core Pacific-Yamaichi such that repeated material breaches of the same kind would trigger an accelerated enforcement response.
• SFC received 329 complaints, compared with 258 in the same period of last year. I wonder whether the significant increase in complaint figure was caused by "accumulators".
• SFC issued a joint consultation paper with HKEx to seek public feedback on allowing paper application forms to be handed out for public offers of shares, debentures and authorized CISs, without also having to hand out paper offer documents if electronic offer documents are available from websites. Comments are being reviewed by SFC. Given that most of the HK people have regular access to the internet, this proposal seems highly feasible.
• Companies can now list in HK by way of depository receipt after SFC approved proposed changes to the main board listing rules. SFC has also approved the re-positioning of the GEM board as a secondary board and a stepping stone to the main board. I doubt if this could "rescue" the GEM board if it is labelled as a platform for "inferior" companies.
• SFC approved HKEx's proposal to introduce gold futures in HK. Trading of gold futures is expected to start in Oct 2008. Would one more "gambling" tool be made available to the retail investors?
• SFC also approved HKEx's proposed amendments to relax the tick rule. It is said the current stock market has suffered from substantial short selling activities. Would relaxation of the tick rule worsen the situation?
• Two teams have been assigned to handle licensing applications by Mainland fund managers. Would SFC offer any "special treatment" to them?

The staff length of SFC has not increased when compared with one year ago. It seems that the workloads of SFC staff have become heavier.