Legislative Council

LC Paper No. CB(1)1672/98-99

Ref : CB1/PL/FA

Purpose

This paper proposes the setting-up of a subcommittee under the House Committee to study the major reform proposals under the Securities and Futures Bill ("the Bill") prior to its introduction into the Council, based on the recommendation of the Financial Affairs Panel ("FA Panel").

Background

2. The Financial Secretary announced a major overhaul of the legislation governing the securities and futures markets in his 1999-2000 Budget Speech as an integral part of Government's effort to modernize and consolidate the regulatory framework so as to enable the securities and futures industry to remain competitive. The legislative reform will be reflected in a composite Securities and Futures Bill which is expected to be introduced into the Council by the end of 1999.

3. The Bill to be introduced will be built upon the draft composite Securities and Futures Bill published by the Securities and Futures Commission ("SFC") for public consultation in April 1996, which seeks to consolidate and update the following nine ordinances governing the securities and futures markets -

1. Securities and Futures Commission Ordinance (Cap. 24);
   
   
2. Securities Ordinance (Cap. 333);
   
   
3. Commodities Trading Ordinance (Cap. 250);
   
   
4. Protection of Investors Ordinance (Cap. 335);
   
   
5. Stock Exchanges Unification Ordinance (Cap. 361);
   
   
6. Securities (Insider Dealing) Ordinance (Cap. 395);
   
   
7. Securities (Disclosure of Interests) Ordinance (Cap. 396);
   
   
8. Securities and Futures (Clearing Houses) Ordinance (Cap. 420); and
   
   
9. Leveraged Foreign Exchange Trading Ordinance (Cap. 451).
   
   

In addition, new elements such as measures to enable clearer regulatory objectives and more effective supervisory and investigative powers for the SFC as announced by the Financial Secretary in his Budget Speech will also be incorporated in the Bill.

Major reform proposals under the Bill

4. On 5 July 1999, the FA Panel received a briefing by the Administration on the major reform proposals under the Bill, which include the following:

．Clear regulatory objectives for SFC

．More effective supervisory and investigatory powers for SFC

．Streamlined licensing regime of market intermediaries

．Regulation of automated trading facilities

．Establishment of Market Misconduct Tribunal

．Statutory backing for listing rules and liability for misstatements

．Statutory private right of action

．SFC's intervention into third party litigation

5. The FA Panel notes that the Administration will commence the drafting of the Bill while public consultation on the reform proposals is being conducted. In view of the complexity of the Bill, the FA Panel considers it more desirable to advance the detailed study of the major reform proposals by inviting the Administration to brief Members on each of these proposals in separate briefing sessions. In so doing, there will be more time for the exchange of views between Members and the Administration, as well as for soliciting views from interested parties. Besides, Members' input could also be incorporated into the draft Bill before it is introduced into the Council.

6. As other Members of the Council may also wish to take part in the detailed study of the proposals, the FA Panel recommends that a subcommittee be formed under the House Committee to commence study on the draft Bill in September 1999 before the Bill is introduced. Those Members who have joined the subcommittee may, if they so wish, remain as members of the Bills Committee once it is formed after the introduction of the Bill. Other Members of course may also be entitled to join the Bills Committee.

Advice Sought

7. Members are invited to advise on the proposal to set up a subcommittee under the House Committee to study the major reform proposals under the proposed Securities and Futures Bill as detailed in paragraph 6 above.


Legislative Council Secretariat
7 July 1999