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The Government seeks to add a new type of regulated activity, provision of credit rating services, to the Securities and Futures Ordinance (Cap. 571) (SFO) in order to create a regulatory regime for credit rating agencies operating in Hong Kong.
A government spokesman said today (February 18), "Under the regulatory regime, both corporate credit rating agencies in Hong Kong and their individual rating analysts will need to be licensed and be subject to the general obligations which are common to all persons licensed or registered under SFO."
In this connection, the Securities and Futures Ordinance (Amendment of Schedule 5) Notice 2011 (Amendment Notice) and the Securities and Futures (Financial Resources) (Amendment) Rules 2011 (Amendment Rules) are published in the Government Gazette today.
The Amendment Notice is made by the Financial Secretary pursuant to section 142 of SFO, and the Amendment Rules are made by the Securities and Futures Commission (SFC), after consultation with the Financial Secretary, pursuant to section 145 of SFO.
The Amendment Notice seeks to add a new type of regulated activity - "Type 10: providing credit rating services" - to Schedule 5 to SFO. The Schedule has already set out nine types of activities regulated by SFC and included related definitions, which prescribe the nature and scope of each of those regulated activities. The nine types of regulated activities are (1) dealing in securities, (2) dealing in futures contracts, (3) leveraged foreign exchange trading, (4) advising on securities, (5) advising on futures contracts, (6) advising on corporate finance, (7) providing automated trading services, (8) securities margin financing, and (9) asset management.
In addition to adding the new Type 10 regulated activity, the Amendment Notice also adds four related definitions for the purpose of Schedule 5 - "credit ratings", "debt securities", "preferred securities" and "providing credit rating services".
On the other hand, the Amendment Rules amend the Securities and Futures (Financial Resources) Rules (Cap. 571 sub. leg. N) to provide for capital requirements for corporations licensed for Type 10 regulatory activity and connected matters.
SFC will also publish a new code of conduct to help ensure that the credit ratings are independent, objective and of appropriate quality.
SFC conducted a public consultation from July 19 to August 20 last year, and received overwhelming support for the proposal to establish a regulatory regime for credit rating agencies.
"The proposal is generally consistent with the expectations laid down by G20 and the regulatory models that have been adopted (or are in the process of being created) in other jurisdictions. It will enhance investor protection and enable credit ratings prepared by Hong Kong-based credit rating agencies to continue to be serviceable in other jurisdictions,蒅 the spokesman said.
The Amendment Notice and Amendment Rules will be tabled before the Legislative Council (LegCo) on February 23. Subject to LegCo's negative vetting, they will come into operation on June 1.
Ends/Friday, February 18, 2011
Issued at HKT 15:42
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