The aim of the paper is to conduct the discussion of the statement which says that regulators issues rules and regulations via codes, guidelines and circulars in every country and how these rules and regulations are important in protecting the interest of investors and confidence of customers. In Hong Kong, the major rules and regulations are prescribed by the Hong Kong securities and Future commission with the other Hong Kong Regulatory bodies which majorly include the Hong Kong Monetary Authorities (Hong Kong Monetary Authority, 2018). In the present era, this has been found that steadily increase in the regulation with the strengthened study can control the fixture of the banking in the international market from years now and Hong Kong doesn’t remain the exception in this. Further, the report shows disagreement on the point related to straight adherence is enough to contribute in meeting the objectives.
The authorities of Hong Kong ensure that their regulations combine the system of different markets and institutions that offer a wide range of products and services majorly to the customers and investors in Hong Kong market (Chin Family, 2018). The financial markets are majorly categorized as: –
Companies in Hong Kong who wish to carry out the banking service or business involve the taking of deposit need Banking Ordinance that is authorised by HKMA. The major importance of regulations include the managing the currency stability, effective management of the exchange fund, supporting Hong Kong in maintaining the financial centre and effective promoting the integrity and stability related to the financial system (Hong Kong Monetary Authority, 2018). The rules and regulations that are introduced by the HKMA help in adhering the effective liquidity, capital, adequacy and periodic returns which plays a vital role for the investors and customers. This supports the investors to make their investment effective as they can get effective results. Further, the customers will be able to rely on Hong Kong financial services. HKMA enforce the law that limits on the loan to the customers or employees and directors which helps the banking system in HK to regulate their operations effectively.
The above given are some of the rules and regulations that are applicable in Hong Kong with the motive to manage the operations.
Misconduct in financial services leads to loses to the consumers and investors in the market. For example; Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA [2012] HKEC 903, in this case, the customer brought the claims according to the allegation on the relationship with the managers. There is a breach on the alleged duty that is to effectively monitor the customer’s account and to make them aware about the consequences. The court stated the decision in the favour of the HSBC bank. Though, this was not sufficient as there is need of the culture of ethics, governance, feedback assessment of customers and the Incentive system (Freris, 2018). This shows that the financial regulators strive majorly to promote fairness in the market, protection to the interest of investors and minimizing the crime through combating offences.
SFC prepares the future decisions in protecting the notice of the participating public, to reduce the systemic risk majorly for the investors, to minimise the crime and misconduct and to assist in maintaining the monetary firmness of Hong Kong towards the customers (Hong Kong Lawyer, 2016).This has been found that there is an allegation of the mis-selling that is considered as one of the familiar themes in the handful of investors disputed that have gone to experimental in Hong Kong since the financial crises. For example; DBS Bank (Hong Kong) Ltd v Sit Pan Jit [2016] HKEC 1307, CACV 91/2015, a recent case that took place when investor’s appeal for the dismissal of claims for the misrepresentation. Thus, it shows the importance of regulations if financial firm perform roles and responsibility in effective manner than the investors will be able to make secure investment and customers will be able to enhance their trust.
SFC contributes in risk that is majorly faced by the investors while making the investment related to the securities. The key defence is one of the actual central clearing and settlement systems that lead to proper risk management which is applied by the SFC (Securities and Future Commission, 2018). The implementation of the regulations and code of conduct of SFC ensure that proper advice has been offered to the customers by the financial representatives. The breach of which leads to the case law for instance: DBS Bank (Hong Kong Limited) v San-Hot HK Industrial Company Limited and Hao Ting [2013] HKEC 352, a case which reflects the customer based her misrepresentation on the common law,the Ordinance of Misrepresentation and the section 108 of the SFO.
The establishment of the CCASS was one of the key achievements that lead to the development of the equity market of Hong Kong which contributes in reducing the risk factor that is associated with the investment. To offer the protection to the investors for the securities exchange actions outside the exchange, there are some instructions related to the capital resources that a lawful dealer must have. All this compliance in the Hong Kong market is measured by the Stock Exchange of Hong Kong (Stock Exchange) and the Securities and Futures Commission (SFC) due to which it is working effectively (Godfrey, 2018). The existence of the stock exchange in Hong Kong market capable to return fund to reimburse the investors for the event related to the broker default, a compulsory broker’s insurance policy that offers the protection to the investors from the different types of loss or theft of the securities or cash.
I totally disagree to the statement which says that the straight adherence to all the rules is sufficient to meet the objectives. The compliance comes does not comes within the organisation with rules and regulations as there is need of culture in Hong Kong financial system.
Culture is considered as a set of the professionals and ethical values that majorly reflect the behaviour and attitude as observed and pursued by the bank’s shareholders, board members and staff. The real forces that drive to the compliance include culture that includes its three pillars of culture that include governance, incentive system and the assessment of feedback mechanism. All these three pillars contribute effective culture and help the financial firms to manage the compliances with the adherence of rules and regulations (Hong Kong Monetary Authority, 2017). The compliances are essential for the protection of the investors and customers, ensuring that the market is fair, efficient and transparent, reduce the systematic risk, reduce the financial crime, and maintain the confidence of customers in the financial system
Governance includes the effective and continual communication and training that is maintained by the financial services. The board plays a vital role in establishing a culture and behaviour standards that encourage the prudent risk taking and treat client fairly. One of the case law that leads to the disciplinary action which includes the breach of Honesty is Lam Yuk Wai. Lam Yuk Wai was guilty of misconduct and not fit due to which it was banned by the SFC (SFC, 2016). HSBC broking has reported Lam’s misconduct to the police. In the case, HSBC broking reported that unauthorized trades in a number of client accounts in 2015.
In addition to this, the governance also include that the financial services are not able to meet their obligations related to the assigned duties that reflects the culture. For instance; Zhang Hong Li v DBS Bank (Hong Kong) Ltd CACV138 & 139/2017, 27 July 2018, is the recent episode of the investor’s lawsuit that is flowing from the 2008 financial crisis. This can be said that investors got partly succeeded in their entitlements in against of the banks and it can be concluded on the basis of breach of the trustee duties in the observing of their investment. The case reflects that the behaviour of the banks is to inform the truth after reviewing the investment (Hong Kong Monetary Authority, 2017). Thus, it is recommended to take the ownership of the risk and the culture reforms in their firms towards their investors and customers which will help them to accomplish the desired goals.
Incentive system should not only include the rewards towards the effective business performance but it also includes other factors that adhere to culture and standards of behavioural. This pillar ensures that there is adequate consideration for the behaviour indicators is essential for the financial services in HK. The misleading towards the culture behaviour can lead to the strict action and mentalities. For instance; Ms Chau Hang Yu and Mr Steve Chow Chun Yin, former employees of HSBC banned due to the false claims in the year 2012 and 2014 for subscribe for the unit trust funds (Case No: DCCC 130/2015) (SFC, 2016).
One of the general principles of the code includes that AIs must treat their customers in the equitable, honest and in a fair manner at times (General legal Insight, 2018). This supports in making the customers knows about the key features, risk and terms related to the products, fees, commission and many other. The misleading of this might lead to the different allegations on the company as well on the customer. For instance; Shine Grace Investment Ltd v. Citibank, N.A. and Another (HCCL 28/2008), this is the case related to the mis-spelling of the equity accumulator contracts by the Citibank. This was found that allegation was related to the breach of the intermediate duty to offer a reasonable, fair, and accurate with honest advice and a duty not to mislead. Thus, this shows that adherence with the rules and regulation is not enough in Hong Kong the firms involved in financial services need to maintain the culture standards and behavior (Hong Kong Monetary Authority, 2017). This adherence to the culture will help the financial services in Hong Kong to meet their goals.
The culture also includes the procedure in place to assess the behaviour of culture and to allow the management to get the feedback from the staff and to manage the complaints. It has been found that an AI should put in place an effective mechanism that can help in emulating the actual behaviour which will help the manager to consider whether any necessary changes are required or not. Monitoring of the core parameters through staff feedback surveys, customers feedback, complaints, breaches and complaints will help in assessing the change that is essential (Hong Kong Monetary Authority, 2017).
It is recommended to the AI that it is must to draw the qualitative information that is related to the culture from the employee’s surveys, focus group discussion or the interviews. Moreover, considering the case stated above this can be said that there is need of internal escalations channels which will help the employees in raising the complaints against person who doesn’t follow the cultural behaviour that can meet the goals of HK financial firms effectively.
Conclusion
In the end, it can be concluded that the Hong Kong financial regulator issue rules and regulations via codes, circulars and guidelines. All these rules and regulators contribute to protect the interest of the investors and in the looking after of consumer confidence in the financial system of the country. The findings of the paper reflect that misleading of the rules and regulations affect the customers due to which they claim for the allegation related to the firm on the incompletion of law. Further, this has been found that the rules and regulations are not sufficient for meeting the goals in the financial sector of HK. Moreover, the culture of the financial system contribute effectively in managing the compliance which include three pillars (Governance, incentive system and assessment and feedback mechanisms) that are discussed with the support of law.
References
Chin Family. (2018). A Quick Guide to Hong Kong’s Financial System and Services. Retrieved from: https://www.thechinfamily.hk/web/common/pdf/publication/en/IEC-quick-guide-to-hk-financial-system-and-services.pdf
DBS Bank (Hong Kong Limited) v San-Hot HK Industrial Company Limited and Hao Ting [2013] HKEC 352
DBS Bank (Hong Kong) Ltd v Sit Pan Jit [2016] HKEC 1307, CACV 91/2015
Freris, A. F. (2018). The financial markets of Hong Kong. New York: Routledge.
Godfrey, A. M. (2018). Hong Kong Securities and Futures Commission (SFC) highlights operating, control and compliance deficiencies in the asset management industry. Journal of Investment Compliance, 19(1), 63-68.
Hong Kong Lawyer. (2016). Execution Only. Retrieved from: https://www.hk-lawyer.org/content/execution-only
Hong Kong Monetary Authority. (2017). Bank Culture Reform. Retrieved from: https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2017/20170302e2.pdf
Hong Kong Monetary Authority. (2018). Regulatory Framework. Retrieved from: https://www.hkma.gov.hk/eng/key-functions/banking-stability/banking-policy-and-supervision/regulatory-framework.shtml
Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA [2012] HKEC 903
Securities and Future Commission. (2018). Regulatory objectives. Retrieved from: https://www.sfc.hk/web/EN/about-the-sfc/our-role/regulatory-objectives.html
SFC. (2016). SFC bans Chau Hang Yu and Steve Chow Chun Yin for life. Retrieved from: https://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=16PR87
SFC. (2016). SFC bans Lam Yuk Wai for life. Retrieved from: https://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=16PR147
Shine Grace Investment Ltd v. Citibank, N.A. and Another (HCCL 28/2008)
Zhang Hong Li v DBS Bank (Hong Kong) Ltd CACV138 & 139/2017, 27 July 2018
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