31-05-2019

4. Recommendations. 4.8 Architecture

E 4.8.1 Establish a CG Unit and CG Group

Step required
Establish a regulatory agency based CG cum shareholder interest unit and an external industry group.

Recommendation level
Explore.

Topic addressed
Whether a specialized body that is concerned solely with CG policy development in view of minority shareholder concerns would facilitate CG policy development.

Details of recommendation
1.The CG Unit to be charged with CG policy development based on information as to, for example, enforcement hurdles presented to individual investors that wish to bring a damages claim, with a view to better policy development on the problem.
2.If established within the SFC, the CG Unit would coordinate across Divisions where specific issues such as listing rule development or CG enforcement affects the interests of shareholders.
3.The CG Group to be comprised of external experts and industry participants from different sectors of the market with a view to exploring the commercial, legal and regulatory boundaries of important CG issues.
4.The CG Group is to operate on an informal basis, providing input to the CG Unit as and when requested to do so.

Attendant considerations
To explore the parameters of such a CG Unit and how it would be funded.
To identify the composition and operation of the CG Group.
Location of group contingent on implementation of A4.8.2** «Establish an investor protection agency».

Jurisdiction references
United States (SEC's Office of the Investor Advocate and the Investor Advisory Committee).
Hong Kong (SFC's Risk and Strategy Unit, and the Fintech Advisory Group).

Section 3 reference
3.7.2 Policy development agencies.

E4.8.2**Establish an investor protection agency

Step required
Policy-led initiative.

Recommendation level
Explore.

Topic addressed
An unconflicted representation of shareholder rights by a body not presented with the same constraints and considerations as the SFC.

Details of recommendation
1.An expert group to be appointed by the Government and mandated to consider the benefits and drawbacks of establishing an investor protection agency.
2.To consider the primary legislation needed.
3.The agency would need to be empowered to bring actions under sections 213 and 214 of the SFO.
4.The agency would need to possess appropriate powers of investigation that are aligned with those possessed by the SFC.
5.The agency would need to have appropriate access to information held by other regulatory agencies including the SFC and the HKMA.
6.The agency would need to enter into MoUs with other regulatory agencies for appropriate coordination on matters of common interest.
7.To explore details of the agency's objectives, powers, accountability, governance, staffing and funding.

Attendant considerations
Dealing with likely resistance from the SFC and the market.
The SFC's existing powers remain intact.

Jurisdiction references
United States (Consumer Financial Protection Bureau).

Section 3 reference
3.7.3 Enforcement agencies
See also:
3.7.2 Policy development agencies;
3.7.6 Role of fiduciary law.