The Government is determined to maintain and strengthen Hong Kong's status as a leading international financial centre. For this purpose, a Financial Market Development Task Force was set up in December 2001 to provide a high-level forum to coordinate new initiatives in promoting the development of Hong Kong's financial markets. The Task Force brings in expertise and professional input from the regulators and market participants, and reports progress to the Financial Secretary from time to time.

    The individual regulators will continue to further enhance Hong Kong's regulatory framework in the light of international experience and standards. The objective is to have an effective regulatory framework that will ensure sound business standards and confidence of the market but without unnecessary impediments of a bureaucratic or fiscal nature.

    Major initiatives to enhance Hong Kong's competitiveness as an international financial centre are outlined in the following paragraphs.

Securities and Futures Ordinance

The SFO, the bill for which was passed by the Legislative Council on March 13, consolidates and modernises 10 ordinances governing the securities and futures markets into a composite piece of legislation, to keep the regulatory regime on a par with international standards and practices. It seeks to facilitate development of a fair, orderly and transparent market to promote market confidence; secure appropriate investor protection; reduce market malpractice and financial crimes; and facilitate market innovation and competition. The commencement of the SFO, targeted on April 1, 2003, will enhance Hong Kong's position as an international financial centre and the premier capital formation centre for the Mainland. By year-end, the making of the 40 sets of subsidiary legislation necessary for the SFO to commence was at the final stage.

    Main features of improvement under the new regulatory regime include:—

Company Law and Corporate Governance Reform

The Standing Committee on Company Law Reform (SCCLR), established in 1984, meets regularly to consider amendments to the Companies Ordinance to ensure that it meets the changing needs of the business community and regulators.

    The Overall Review of the Companies Ordinance by the SCCLR has resulted in 62 recommendations for reform. Most of the Phase I recommendations and the legislative amendments required to facilitate electronic service delivery at the Companies Registry have been included in the Companies (Amendment) Bill 2002. The bill, which was introduced into Legislative Council on January 30, 2002, is being scrutinised by a Bills Committee formed in July.

    The SCCLR has also assumed responsibility for undertaking the Corporate Governance Review, which aims to identify and bridge any gaps in Hong Kong's corporate governance regime, making it a benchmark in the region. The SCCLR has made good progress in the review which mainly covers directors' duties and responsibilities, shareholders' rights and the disclosure of corporate information. In July 2001, the SCCLR issued a consultation document setting out various proposals on Phase I of the review, and appropriate follow-up action is being taken in the light of the comments received. The SCCLR is continuing with Phase II of the review which will be concluded in 2003.

Enhancement of the Financial Infrastructure

As part of the three-pronged strategy announced in the Budget Speech in March 1999 for reforming the securities and futures markets in Hong Kong, the Financial Secretary appointed a Steering Committee on the Enhancement of the Financial Infrastructure (SCEFI) to study and recommend the necessary improvements to the financial infrastructure in Hong Kong. The objective of the study is to enhance the competitiveness of Hong Kong as an international financial centre in terms of risk mitigation, efficiency enhancement and cost reduction. The Steering Committee recommended the development of a single clearing arrangement for securities, stock options, futures and other exchange-traded transactions; straight-through processing and a scripless securities market.

    A number of short-term measures have been implemented. The Securities and Derivatives Communication Network (SDNet) that electronically links members of the securities and futures community was launched by the SFC in August 2000. Three applications were launched on the SDNet, including electronic submission of financial resources rules returns (e-FRRR), electronic IPO services (eIPO) and the electronic transmission of reports from the clearing houses to the SFC.

    As part of the SCEFI initiatives, a working group comprising representatives from the HKMA, SFC, HKEx and Hong Kong Interbank Clearing Limited (HKICL) was set up in March 2001 to explore the feasibility of improving the DvP arrangements for settling payments in share transactions under the CCASS. The working group drew up recommendations to improve equities settlements under the CCASS, which are being considered by the HKEx.

    In December 2001, the SCEFI II was established with the goal of furthering the vision and efforts of the original SCEFI initiatives. The SCEFI II published its report in December. The report outlines recommendations for the enhancement of Hong Kong's financial infrastructure with a view to making Hong Kong the preferred location in the Asian time zone for investors. The report identifies three strategic objectives: the development of an efficient and robust market infrastructure; the improvement of connectivity and interoperability of market infrastructure; and the capture of superior liquidity.

    The Government, together with the SFC, the HKMA and the HKEx, is pressing ahead with the implementation of the SCEFI II recommendations.

    On scripless trading, a public consultation ended in May. A legislative framework is being put in place to provide the enabling legal environment.

Human Resources Development

A robust physical infrastructure cannot function effectively without the input of trained persons of the right calibre. Hong Kong needs to have a workforce that is adaptable and well-equipped to meet future challenges and to reap the benefits offered by new opportunities. The Advisory Committee on Human Resources Development in the Financial Services Sector was established in June 2000, tasked with the mission to develop a vision on human resources development in the financial services sector. The Advisory Committee coordinated an internship programme for local university students in the summer. It has also sought the assistance of the Vocational Training Council in collecting more statistics on the manpower situation in the banking and finance industry.