SFC's Policy Statement for National Security Law

It's rare for SFC to issue a press release on Sunday but it did it today by issuing a Policy Statement in relation to the new National Security Law (NSL).

This Statement was issued as a result of conversations between SFC and globally active financial institutions ("firms") operating in HK markets. These conversations have centred on concerns expressed by firms about the potential ambit and effect of the NSL on the way they currently do business in HK. SFC said it has communicated firms' observations to the HKSAR Government, and welcomes the views of the Financial Secretary as set out in his Blog today.

In this Statement, SFC expressed the following viewpoints:

• SFC is not aware of any aspect of the NSL which would affect or alter the existing ways in which firms and listed companies originate, access, disseminate and transmit financial market and related business information under the regulatory regime it administers. For example, the principles applicable to, and methodologies used by, analysts in terms of the sources of information and data they use and the manner in which their views and opinions are expressed in their reports should remain unaltered.
• Equally, the rules and accepted practices governing market trading activities, including in exchange traded and OTC derivative markets, the use of hedging strategies and activities under Hong Kong's short selling regime, also remain unaltered; all related regulations will be administered by SFC in the same manner as before the advent of the NSL.
• SFC will continue to regulate Hong Kong's markets as it has done so before the NSL was enacted and in line with this Statement.

Having read this Statement, I still cast doubt on whether it has alleviated the following concerns:

• If analysts fail to independently issue negative views on Chinese-related companies due to the NSL, would they be sanctioned by SFC?
• Could listed companies or intermediaries use the NSL as a shield to deter SFC's enforcement actions?
• Would SFC impose restrictions on short selling or use of derivatives when the Hong Kong financial markets have encountered a big crisis (like what happened during 1997-98)?
• If the US impose sanctions on persons who support the NSL (e.g. HKSAR government officials), would SFC allow or mandate licensed firms to follow suit?

I sincerely hope SFC, being led by Mr Ashley Alder, would continue to stand firm with Hong Kong's regulatory standards.