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Part III Regulation of Financial Products, 7 Asset Management and Investment Products »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter presents an overview of the legal and regulatory framework for financial products and asset management in Hong Kong. The chapter discusses the regulatory framework for asset management generally and provides an overview of the legal and regulatory framework for a variety of financial products. Most financial products are largely matters of private contract and therefore governed by the common law framework, with disputes adjudicated by the courts. However, in Hong Kong a variety of statutes address an ever growing range of financial products, including: bills of exchange and cheques (Bills of Exchange Ordinance); company shares (Companies Ordinance and Listing Rules); and security interests (Companies Ordinance, Bankruptcy Ordinance, and other property related ordinances). The chapter also considers opportunities for the asset management industry in Hong Kong.

Authors and Consulting Editor »

From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)

Part II Regulation of Banking, Securities, and Insurance, 3 Banking Regulation and the Hong Kong Monetary Authority »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter explains the legal and institutional framework for banking in Hong Kong. It discusses the regulation of financial intermediaries, products, and services in the context of a framework based largely on the Banking Ordinance, the Exchange Fund Ordinance, and the Clearing and Settlements Systems Ordinance, supported by ordinances derived from international best practice. The chapter summarizes the main functions of the Hong Kong Monetary Authority (HKMA). Established in 1993, the HKMA maintains Hong Kong as an international financial centre and ensures that Hong Kong’s legal and regulatory framework for banks is comprehensive and of an international standard. At the same time, the chapter argues, the system’s many divisions allow certain risks to remain unaddressed. A specific area of concern applies to financial conglomerates, in that there is no clear division of regulatory responsibility in the case of the insolvency of a financial conglomerate.

Part V The International Dimension, 12 The China Nexus »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter focuses on the financial markets and related legal and institutional frameworks in mainland China, in the context of China’s liberalization commitments under the World Trade Organization (WTO) and the Closer Economic Partnership Arrangement (CEPA). Today, Hong Kong and its financial markets perform a number of roles in respect to China. As part of the People’s Republic of China, Hong Kong increasingly must deal directly with resulting issues and questions, both as a result of the increasing use by mainland companies of Hong Kong’s financial markets (e.g. listing on the stock exchange) as well as supporting business in China. At the same time, the resulting interconnection between the two economies and financial systems brings challenges for Hong Kong. This is especially true of questions relating to mainland companies raising money in Hong Kong and resulting issues of disclosure, corporate governance, and related enforcement problems.

Contents »

From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)

Contents—Summary »

From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)

Part IV Financial Market Conduct and Misconduct, 10 Corporate Governance »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter addresses corporate governance in Hong Kong. The chapter reviews the ways in which a company’s management is regulated in Hong Kong at common law and equity, by statutory legislation, by the company’s constitutional document (the articles), and by regulatory rules. Such a framework addresses issues such as board structure and operation, the personal interests of directors, dealings between the company and directors, limiting the power of directors, disclosure of information, and the question of when shareholders should be involved in decisions of the board. The chapter shows that due to the domination of companies in Hong Kong by either families or state-owned companies from mainland China, Hong Kong companies have the typical agency problem we see in the United States and the United Kingdom, namely weak performance by the managers, and also suffer from the misappropriation of corporate assets through connected or related party transactions.

Part III Regulation of Financial Products, 8 Financial Derivatives »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter examines the financial derivative instruments traded and used in Hong Kong. The chapter describes the current main types of financial derivatives, their uses and risks, and examines Hong Kong’s twofold approach to their regulation. It also raises questions that may not be fully addressed in any major financial jurisdiction; for example, how the law accounts for relatively new, sophisticated contracts, especially in relation to user protection; whether related areas of law such as bankruptcy may conflict with what has become customary derivative market practice; and how credit risk transfer facilitated by derivative instruments may conflict with established precepts of financial regulation. Lastly, it considers whether links between the territory’s regulators and the stock exchange are well-suited to the supervision of certain derivative activity and to investor protection.

Part I Finance in Hong Kong, 2 Financial Regulatory Structure »

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse
From: Financial Markets in Hong Kong (2nd Edition)
Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)
This chapter describes the overall legal and regulatory framework supporting financial markets in Hong Kong. This is developed in tandem with, and in response to, their characteristics. Regulatory reforms in the financial markets of Hong Kong have typically been developed after a financial crisis and market failure. However, while Hong Kong has not always had effective systems of financial regulation, it has been steadily strengthening its regulatory framework both for financial markets and institutions. This chapter argues that the increasing effectiveness of its legal and institutional regulatory framework has enhanced its development as an international financial centre over the past two decades and will be vital to its continued success in the future. The chapter concludes by outlining the common objectives of the Hong Kong financial regulators today.

Part VI International Markets and Exchanges, 21 Hong Kong Markets and Exchanges »

Douglas W Arner, Berry FC Hsu
From: Financial Markets and Exchanges Law (2nd Edition)
Edited By: Michael Blair, George Walker, Stuart Willey
21.01 This chapter describes the main elements of current financial sector activity in Hong Kong and the conditions under which they function. Hong Kong’s financial markets and economy did suffer a substantial downturn following the global financial crisis in 2008–09, although no major regulatory gaps were identified nor significant new regulatory changes considered necessary. Hong Kong is nevertheless expected to give effect to all of the principal new reforms adopted at the international level, in particular with regard to capital adequacy and liquidity and the...