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New Memorandum Of Understanding Between The Securities And Futures Commission And The Hong Kong Monetary Authority

Date 13/12/2002

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) jointly announce today that a new Memorandum of Understanding (MOU) between them has been signed. This is a significant milestone in the preparation for the new regulatory regime under the Securities and Futures Ordinance (SFO) and the Banking (Amendment) Ordinance 2002.

The new MOU elaborates on the legal framework and sets out the two regulators' mutual understanding in respect of the regulation and supervision of registered institutions and their relevant staff. Registered institutions are those authorized institutions under the Banking Ordinance which are registered with the SFC to conduct regulated activities as defined in the SFO. The SFC and the HKMA share responsibility for the regulation and supervision of registered institutions.

Under the SFO, authorized institutions under the Banking Ordinance will no longer be exempt from regulation in relation to dealing in and advising on securities. Instead of being exempt dealers under the current legislation, they will be required to seek registration from the SFC in order to carry out the regulated activities concerned.

In that regard, the criteria adopted in determining whether authorized institutions are fit and proper for the purpose of registration will be consistent with those adopted in considering applications for the grant of licences to stockbrokers. In addition, the relevant employees of registered institutions will be required to meet the same competence and continuous professional training requirements as for SFC licensed representatives.

Under the new regulatory regime, registered institutions and their relevant employees will be formally subject to the various rules, codes of business conduct and guidelines issued by the SFC. They will also be subject to the same disciplinary measures in case of misconduct as those applicable to SFC licensees.

This MOU will replace the existing one which was signed in October 1995. It will be effective on 1 April 2003, the day to be appointed for the commencement of the SFO. Mr Andrew Sheng, Chairman of the SFC, said: "With this new MOU signed, the SFC and the HKMA will further strengthen their co-operation under the new regulatory regime. Furthermore, with a view to maintaining a level playing field for all industry participants, the MOU emphasises the adoption of a consistent supervisory approach and the establishment of effective communication channels between the two regulators." Mr Joseph Yam, Chief Executive of the HKMA, said: "The new MOU sets out the respective roles and responsibilities of the SFC and the HKMA under the new regulatory regime. While the HKMA will remain the front line supervisor of registered institutions, the regulatory standards set by the SFC in relation to the conduct of regulated activities will be applied to these institutions." Both the SFC and the HKMA have posted a copy of the MOU on their websites at and respectively.