Sunday, May 6, 2018

Alexa Lam on Enforcement of Hong Kong’s Securities Law: The Underpinning Philosophy (new book chapter)

Alexa Lam
in Robin Hui Huang & Nicholas Calcina Howson (eds), Enforcement of Corporate and Securities Law: China and the World (CUP, 2017), pp. 359-368
Introduction: Enforcement of the securities law is an important function in serving the communities we live in. Demand for enforcement is not always matched by an increase in resources. In Hong Kong, the securities regulator – the Securities and Futures Commission (SFC), increased its resourcing in terms of headcount by 40 per cent since 2007. But the regulator’s workload also increased. Their investigation workload increased by 240 per cent, and litigation work increased by over 500 per cent. And just for the year 2014, their investigation caseload increased by over 50 per cent. This is certainly an exponential increase in demand for enforcement services. In addition, there are also limitations to what the law by itself can achieve. Existing laws and regulation do not always provide the perfect solutions and tools that policy makers and regulators desire. The regulator simply cannot afford to wait for the perfect powers to be available, if they ever will be, before it does the job it is expected to do. Legal reform and new legislation take time and resources, not to mention the challenges of overcoming the political hurdles and getting the requisite support to pass a bill at the Hong Kong legislative body. Despite the challenges, this must be right, because there is no guarantee that even an all-powerful regulator with far-reaching powers can achieve its mandate or be able to avoid unintended consequences. In this chapter, I will explore my belief that it is less of a question of how much power you have, and more about how you use what you have to achieve a fair and balanced result of protecting investors and market integrity. The regulator should have a very clear idea of what exactly it wishes to achieve based on a good understanding of the industry it regulates. The technical challenge for enforcement is how it can continue to be effective without getting bogged down when the workload outstrips its resourcing capacity and how to avoid delays that cause its work to simply be out of time and thus irrelevant. The trite saying that justice delayed is justice denied continues to ring true. In my view, much can be achieved within the legal confines of the regulatory framework with the judicious use of strategic thinking, creativity and determination. Hong Kong has quite effectively put this into practice. This is my main takeaway.

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