LEGISLATIVE COUNCIL ─ 12 July 2001 7709 OFFICIAL RECORD OF PROCEEDINGS Thursday, 12 July 2001 The Council met at Nine o'clock MEMBERS PRESENT: THE PRESIDENT THE HONOURABLE MRS RITA FAN HSU LAI-TAI, G.B.S., J.P. THE HONOURABLE KENNETH TING WOO-SHOU, J.P. THE HONOURABLE JAMES TIEN PEI-CHUN, G.B.S., J.P. THE HONOURABLE DAVID CHU YU-LIN, J.P. THE HONOURABLE CYD HO SAU-LAN THE HONOURABLE ALBERT HO CHUN-YAN IR DR THE HONOURABLE RAYMOND HO CHUNG-TAI, J.P. THE HONOURABLE LEE CHEUK-YAN THE HONOURABLE MARTIN LEE CHU-MING, S.C., J.P. THE HONOURABLE ERIC LI KA-CHEUNG, J.P. DR THE HONOURABLE DAVID LI KWOK-PO, G.B.S., J.P. THE HONOURABLE FRED LI WAH-MING, J.P. DR THE HONOURABLE LUI MING-WAH, J.P. THE HONOURABLE NG LEUNG-SING, J.P. PROF THE HONOURABLE NG CHING-FAI 7710 LEGISLATIVE COUNCIL ─ 12 July 2001 THE HONOURABLE MARGARET NG THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, J.P. THE HONOURABLE JAMES TO KUN-SUN THE HONOURABLE CHEUNG MAN-KWONG THE HONOURABLE HUI CHEUNG-CHING, J.P. THE HONOURABLE CHAN KWOK-KEUNG THE HONOURABLE CHAN YUEN-HAN, J.P. THE HONOURABLE BERNARD CHAN THE HONOURABLE CHAN KAM-LAM THE HONOURABLE MRS SOPHIE LEUNG LAU YAU-FUN, S.B.S., J.P. THE HONOURABLE LEUNG YIU-CHUNG THE HONOURABLE SIN CHUNG-KAI THE HONOURABLE ANDREW WONG WANG-FAT, J.P. DR THE HONOURABLE PHILIP WONG YU-HONG THE HONOURABLE WONG YUNG-KAN THE HONOURABLE JASPER TSANG YOK-SING, J.P. THE HONOURABLE HOWARD YOUNG, J.P. DR THE HONOURABLE YEUNG SUM THE HONOURABLE YEUNG YIU-CHUNG, B.B.S. THE HONOURABLE LAU CHIN-SHEK, J.P. THE HONOURABLE LAU KONG-WAH LEGISLATIVE COUNCIL ─ 12 July 2001 7711 THE HONOURABLE LAU WONG-FAT, G.B.S., J.P. THE HONOURABLE MRS MIRIAM LAU KIN-YEE, J.P. THE HONOURABLE AMBROSE LAU HON-CHUEN, G.B.S., J.P. THE HONOURABLE EMILY LAU WAI-HING, J.P. THE HONOURABLE CHOY SO-YUK THE HONOURABLE ANDREW CHENG KAR-FOO THE HONOURABLE SZETO WAH THE HONOURABLE LAW CHI-KWONG, J.P. THE HONOURABLE TAM YIU-CHUNG, G.B.S., J.P. DR THE HONOURABLE TANG SIU-TONG, J.P. THE HONOURABLE ABRAHAM SHEK LAI-HIM, J.P. THE HONOURABLE LI FUNG-YING, J.P. THE HONOURABLE HENRY WU KING-CHEONG, B.B.S. THE HONOURABLE TOMMY CHEUNG YU-YAN, J.P. THE HONOURABLE MICHAEL MAK KWOK-FUNG THE HONOURABLE ALBERT CHAN WAI-YIP THE HONOURABLE LEUNG FU-WAH, M.H., J.P. DR THE HONOURABLE LO WING-LOK THE HONOURABLE WONG SING-CHI THE HONOURABLE IP KWOK-HIM, J.P. THE HONOURABLE LAU PING-CHEUNG THE HONOURABLE AUDREY EU YUET-MEE, S.C., J.P. 7712 LEGISLATIVE COUNCIL ─ 12 July 2001 MEMBERS ABSENT: THE HONOURABLE TIMOTHY FOK TSUN-TING, S.B.S., J.P. THE HONOURABLE FREDERICK FUNG KIN-KEE PUBLIC OFFICERS ATTENDING: THE HONOURABLE ELSIE LEUNG OI-SIE, J.P. THE SECRETARY FOR JUSTICE MISS DENISE YUE CHUNG-YEE, G.B.S., J.P. SECRETARY FOR THE TREASURY MR LAM WOON-KWONG, G.B.S., J.P. SECRETARY FOR HOME AFFAIRS MRS LILY YAM KWAN PUI-YING, J.P. SECRETARY FOR THE ENVIRONMENT AND FOOD DR YEOH ENG-KIONG, J.P. SECRETARY FOR HEALTH AND WELFARE MS SANDRA LEE SUK-YEE, J.P. SECRETARY FOR ECONOMIC SERVICES MS AU KING-CHI, J.P. SECRETARY FOR FINANCIAL SERVICES CLERKS IN ATTENDANCE: MR RICKY FUNG CHOI-CHEUNG, J.P., SECRETARY GENERAL MR LAW KAM-SANG, J.P., DEPUTY SECRETARY GENERAL MR RAY CHAN YUM-MOU, ASSISTANT SECRETARY GENERAL LEGISLATIVE COUNCIL ─ 12 July 2001 7713 BILLS Resumption of Second Reading Debate on Bill PRESIDENT (in Cantonese): Council will now continue with the debate on the Second Reading of the Revenue (No. 3) Bill 2001. REVENUE (NO. 3) BILL 2001 MR HENRY WU (in Cantonese): Good morning, Madam President. Being a representative of the financial services sector, I welcome the decision of the Government to reduce the stamp duty on stock transactions from the existing 0.225% to 0.2%. This is consistent with the worldwide trend of reducing or entirely abolishing such stamp duty. It will not only be conducive to bringing down the transaction cost, but will also further consolidate the status of Hong Kong as the prime financial centre in the region. On the other hand, the Government also proposes to increase the existing levy on securities transaction by 0.002%, which would be allocated to the Unified Exchange Compensation Fund (UECF) and subsequently transferred to the proposed new Investor Compensation Fund (the Compensation Fund). The industry supports the proposal. It is believed that the new Compensation Fund, if maintained at a reasonable level, will be helpful to enhancing investor confidence enormously, and will also be conducive to the further development of the financial market in a more healthy manner in the long run. During the course of scrutinizing the Bill, I have raised several practical problems with the daily operation of the industry as a result of the enactment of the Bill, including the payment method of the levy on securities transaction, the format of the trading fee of the Stock Exchange of Hong Kong (SEHK), whether adequate time would be given to the industry for the purpose of upgrading the computer programme, and whether the industry would be allowed to keep on using the existing transaction notes. Madam President, the Bill proposes to remove the portion of the levy accounting to the SEHK and substitute with a trading fee agreed by the Administration and the SEHK. At the operational level, if the industry has to pay the trading fee and the levy to the SEHK and the Government separately, the 7714 LEGISLATIVE COUNCIL ─ 12 July 2001 original streamlined process will become complicated, which may bring about extra procedures to the industry. Fortunately, the Administration told the Bills Committee that the Administration and the SEHK had agreed that even if the fare structure is adjusted in future, the existing payment method would not change, so that inconvenience to the operation of the industry could be avoided. Secondly, given the change in the fare structure, especially a trading fee payable to the SEHK is replacing the original levy, the industry needs some time to make necessary modifications to computer systems or programmes. In order to allow computer consultants commissioned by the industry to carry out the relevant programme modification work, I welcome the decision of the Administration of giving a month's time to the industry to make preparations for compliance with the implementation of the ordinance. Moreover, as many securities companies have already printed different kinds of forms such as transaction notes in advance, and the quantity is probably large, it will be a waste and not environmentally friendly to dispose of them after the enactment of the Bill. For this reason, I hope the Administration will allow the industry to continue to use existing transaction notes or forms. However, the new levy and trading fee should be stated on those transaction notes and forms in print either by computer or by stamp, in order to ensure that investors are aware of the new fare structure. I am delighted that the Administration has accepted my proposal, which will avoid wasting the resources as well as minimizing the extra work and expenses caused the immediate printing of new transaction notes and forms. Lastly, I am also glad that the Administration has undertaken to review, after the assets of the UECF have reached the level of $800 million, the funding needs of the UECF and consider whether the 0.002% levy should continue. I believe that it can ensure the Compensation Fund to maintain a reasonable level of reserve, as well as a further reduction in the cost of securities transaction. Madam President, I so submit. MR SIN CHUNG-KAI (in Cantonese): Madam President, the Democratic Party supports the Bill. Our focus is on the group of small investors. The local securities industry and small investors have been battered by the 1998 financial turmoil and a lot of petitions were staged that year. In addition to strengthening LEGISLATIVE COUNCIL ─ 12 July 2001 7715 regulation of the securities industry, I think the Government should also ensure the compensation fund is maintained at a sufficient level to cope with unanticipated incidents. In fact, the abolition of the minimum brokerage commission rate will take effect by 1 April next year, which I think will constitute potential impact on the securities industry. In order to ensure the Compensation Fund is sufficient to cope with problems when they arise, I support the Government's proposal of increase the existing levy on securities, so as to ensure that the Compensation Fund can meet contingencies. Certainly, with regard to the level of the Compensation Fund, the Government has admitted that a review would be necessary. After the incident in connection with C.A. Pacific Securities Limited, the Government has set the maximum limit of compensation at $150,000. In fact, this $150,000 ceiling was determined on a random basis, because it would mostly cover the compensation for 80% of small investors. At present, the Government has set the compensation limit for bank depositors at $100,000, which would cover 90% of depositors. I believe this should be the scope of duty of the Hong Kong Monetary Authority (HKMA), but the limit of $150,000 should be reviewed in order to examine whether it suffices as the maximum limit of compensation. I believe inducing the confidence of small depositors is an important factor for the market to attract foreign investors to make transactions in Hong Kong.