After discussions with global financial institutions operating in Hong Kong, Alder released a statement early this week “to clarify” the regulator’s view on the likely impact of the controversial law on the freedoms and independent practices that have made Hong Kong a leading global financial hub.
“The SFC… is not aware of any aspect of the [national security law] which would affect or alter the existing ways in which firms and listed companies originate, access, disseminate and transmit financial market and related business information under the regulatory regime it administers,” said Alder, who in May had said he will delay his expected departure from the SFC’s top job for three years.
These unaltered activities include how analysts source information and data, and the manner in which they express their views and opinions.
Moreover, the rules and accepted practices governing market trading activities, including the ability to short-sell stocks, “remain unchanged”, said Alder.
His statement came in the wake of Beijing’s imposition of a new national security law for Hong Kong on 30 June, which has aroused fears about the erosion of the territory’s semi-autonomous status guaranteed under the Basic Law agreed between the UK and China at the 1997 handover.
The legislation, which was devised without the participation of Hong Kong lawmakers, targets crimes it vaguely defines as subversion, sedition, terrorism, and collusion with foreign powers, with penalties of up to life imprisonment.
International businesses are reportedly anxious about the effects on their ability to maintain data security, to express views freely, and in future, to rely on the preservation of the rule of law, which is essential to enforce contracts and resolve disputes.
The ability under the law for China security agencies, who now have an official presence in the territory, to arrest foreign nationals and send them to the mainland for trial is another cause of anxiety.
FSA asked several wealth managers earlier this month about the likely impact of the law on their plans and operations in Hong Kong. The private banking divisions of Citi, Credit Suisse, DBS, HSBC, Indosuez, JP Morgan and UBS all declined to comment.
However, HSBC and Standard Chartered banking groups, as well as conglomerates Swire and Jardine Matheson, backed the legislation even before they had seen the details.
HK’s financial secretary backs Beijing
The statement by the SFC’s Alder on Sunday came in response to a blog earlier that day from Hong Kong financial secretary Paul Chan, who also said he had consulted “a broad range of financial institutions”.
“Their general feedback is that the law will help resuming a safe and orderly business environment, which is of utmost importance for Hong Kong’s continued development as an international financial centre,” wrote Chan.
He insisted that the law will not affect “law-abiding financial institutions”, is “not intended” to affect the way they do business, and that the “way in which they handle their proprietary data, access or transmit information, conduct commercial analysis or express opinion will neither (sic) be affected”. Moreover, the law will “not affect Hong Kong’s judicial independence and the principles of the rule of law”.
Beijing argues that the national security law is needed to counter the widespread civil unrest that was sparked by a proposed extradition bill that would have allowed Hong Kong residents to be tried in mainland Chinese courts. Months of street protests — which China claims were supported by foreign groups — and overwhelming success for the pro-democracy parties in last November’s local elections followed.
“Our pace of development has been hindered by the violent acts [that] happened in the latter half of last year,” wrote Chan.
“The enactment of the law has shown obvious effect in restoring social stability, and it is understandable that it may take some time for the market to adapt to it,” he added, before criticising “the so-called sanction measures invoked by the US recently”.
“It has clearly demonstrated its double standards and hegemony by opposing other countries’ moves to protect their legitimate security and interests, while advocating the importance of national security in their own country,” wrote Chan.