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Following is the speech by the Permanent Secretary for Financial Services and the Treasury (Financial Services), Miss Au King-chi, at the evening reception of the first anniversary celebration of the Investor Education Centre (IEC) this evening (November 20):
Professor Cheng (Professor Leonard Cheng, Chairman of the IEC), committee members of the Investor Education Centre, colleagues from the financial regulatory authorities, distinguished guests, ladies and gentlemen,
Good evening. It gives me great pleasure to join you all to celebrate the first anniversary of the Investor Education Centre (IEC). The video and Professor Cheng's remarks have best captured the key milestones achieved by the IEC in its first 12 months, making us all justifiably proud of having played a part in its establishment and development.
Over the years, our market has been manufacturing increasingly complex financial products that cut across the traditional boundaries of our banking, insurance and securities sectors. We have seen the growing participation of retail investors in these products. The events of the recent global financial crisis showed that over-reliance on caveat emptor would not work, especially when there was asymmetry of information between the sellers and the buyers. While the Lehman incident in 2008 might have exposed gaps in our regulatory regime, it had helped galvanise support from the regulators, the legislature and the investing public for the establishment of an Investor Education Centre. This is the first forum in our history of financial regulation that brings together regulators and industry bodies for a common cause for our investors. It is also a positive by-product coming out of the Lehman incident which will help make our financial market healthier for its participants.
One of our policy objectives in regulating financial services is to protect the investors. Our regulators play an instrumental role in ensuring the fair, open and orderly operation of the market, fit and proper conduct of the intermediaries, and true and adequate disclosure on the investment products. But these would not be enough if we do not seek to empower our investors, especially the small retail investors, to make informed decisions. That is what the IEC seeks to do by enhancing the financial literacy of our investors and redressing any asymmetry of information. I am pleased to note that our financial regulators and industry bodies have been staunch supporters for the work of the IEC.
Indeed, the IEC is turning its plans into action. This summer, the Centre released its strategic plan for 2013 to 2016 based on its research into Hong Kong people's financial knowledge, attitudes, behaviours and abilities to manage finance. It has launched multimedia education campaigns, such as the one with Zhuge Liang reminding us to "Know the risks, Understand your responsibilities and Think before you invest". It has also promoted the public awareness of investment-linked assurance schemes, as a priority task jointly agreed among the Financial Services and the Treasury Bureau and the regulators.
At this gathering, I can see that the IEC has reached out beyond the financial sector to various community organisations. I am sure the Centre is going to forge even closer ties with all of you in educating our investors.
All along we have been practising a largely disclosure-based regime for investment product authorisation. We seek to ensure that the regime will allow investors equal and timely access to all relevant information. The IEC will complement these regulatory efforts to better equip our investors to make an informed decision. But would the market forces work? Have we done reasonably enough to redress the asymmetry in information? In the aftermath of the global financial crisis, some jurisdictions have opted for an interventionist approach by introducing new measures to control investment products, such that products which may exploit investors' mistakes could not find their way to the market. Would this result in better investor protection? Some caution that this may stifle market innovation and hence narrow the choices for investors. Some consider this more a protection measure for the regulators against political risks. And some question if the regulators are in a better position to decide what would be good for the investors. I remember the former Secretary for Monetary Affairs, Mr David Nendick, once said "if we over-protect the investors, they may become careless". As policymakers we have to strike a reasonable balance in promoting responsible market behaviour.
And for the time being, let's not jump to any conclusion. We would continue to monitor international development on this front. No matter whether we follow a disclosure-based or a merit-based product authorisation approach, as the market becomes increasingly sophisticated, investors must be equipped with the skill set to know what they are buying and grapple with the consequences. Thus I truly believe that the IEC would have an important role to play in the development of a healthy market with responsible product manufacturers, sellers and buyers.
Ladies and gentlemen, on behalf of the Government, I thank each of you for your contributions to the IEC and look forward to your continued support for the Centre as the prime driver in investor education. This is crucial in strengthening Hong Kong as an international financial centre and regional investment hub.
Finally, as mentioned by Professor Cheng just now, Miles is going to leave us shortly. Miles has brought to the IEC his overseas experience in investor education which is critical for the IEC's formative months. A solid foundation has been laid for the Centre's future development. I am sure that with the joint efforts of the regulators and the industry, we shall together bring the IEC to its next level. May I wish Miles all the very best as he commences a new journey back home, again with a market regulator.
And to the IEC, happy birthday and many more fruitful years ahead! Thank you and enjoy the evening.
Ends/Wednesday, November 20, 2013
Issued at HKT 19:46
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