The Role of Hong Kong Securities and Future Commission

1. We have the consent with the Judgement of the Hong Kong Institute of Certified
Public Accountants of giving the platinum award to the Securities and Futures
Commission. The SFC, a dedicated independent non-governmental statutory body
which has been able to perform its roles and responsibilities with maximum capacity
utilization in the securities and future markets in Hong Kong. They have been able to
promote the fairmindedness, proficiency, effectiveness, lucidity and regularity of the
securities and futures industry in the market. They have been able to educate their
population of the operations and functioning of the Securities market and have been
able to provide protection to the investors. Hong Kong being a small state with fourth
biggest stock exchange of the world is a testament of its achievements. Investors
around the world feel trusted putting their investments in the stock market because the
SFC has ensured their safety, the cases of corruption are almost negligible, the
participation of the domestic population in trading is substantial and they ensure that
all rules and regulation are followed. Cases of INSIDER TRADING have always been
low in the entire history of the stock market.
The ability of the system to incorporate the changing financial
scenarios of the world is praiseworthy considering the fact that changes in indices are
almost simultaneous in their manifestation. Supported by a good infrastructure,
motivated demographic and a lean efficient SFC, it’s no wonder, Hong Kong is one
of the Asian miracle.

Submitted By:
Group 5
2. The board structure of the SFC is as follows,
• The Board members are appointed for a fixed term by the Chief Executive of
the Hong Kong Special Administrative Region or the Financial Secretary under
delegated authority.
• The Board comprises a Non-Executive Chairman, a Chief Executive Officer
(CEO), other Executive Directors (EDs) and Non-Executive Directors (NEDs).
• The NEDs, who come from a range of professional backgrounds, form most of
the Board.

• The roles of SFC Chairman and CEO have been segregated since the enactment
of the Securities and Futures (Amendment) Ordinance 2006.
• The Chairman leads the Board in setting the SFC’s overall direction, policies
and strategies and in monitoring the performance of the executive arm in
fulfilling the objectives, policies and strategies set by the Board.
• The CEO develops strategic objectives, including setting the SFC’s agenda and
priorities, and implements these objectives as agreed with the Board. He also
reports regularly to the Board, assigns responsibilities to the senior management
and supervises their work.
• Led by the CEO, the Executive Committee (ExCo) comprises all the division
heads.
• The highest executive body within the SFC, the ExCo is charged with
administrative, financial and management responsibilities delegated by the
Board.

The NEDs play a central role in the Board committees. All members of the Audit
Committee and the Remuneration Committee are NEDs. On the Budget Committee,
all voting members are NEDs while two EDs serve in a nonvoting capacity. In
addition, external scrutiny by independent bodies helps ensure that they sustain
fairmindedness and perceive due processes. These include statutory rights of plea,
judicial review and scrutiny by independent panels and tribunals, such as the Process
Review Panel, the Ombudsman and the Independent Commission Against Corruption.

These internal controls and external checks ensure that the policies and procedures
follow best corporate governance practices.

Submitted By:
Group 5
To the extent that whether the executives should be encompassed in board or not, the
mission and the vision of the SFC makes that answer clear as it is a regulatory authority
not a profit seeking unit so the executive members should be a part of the board, as
the board is more familiar with all in and out functioning of the SFC, the issues it faces
and the new policies that need be formalised.
Succinctly, considering all the aspects the board has a strong ethical corporate
governance structure.

Submitted By:
Group 5