Functions

The primary objective of the Corporate Resources Division is to facilitate the efficient functioning of the SFC by the provision and maintenance of appropriate support services at reasonable cost. Major responsibilities include financial control, budgeting, human resources, training, administration, computer hardware and software management, system development, organisation and methods analysis, data management development and the provision of secretariat services to the Commission and its committees.

Finance Section

The Finance Section is responsible for the day-to-day administration of the finances of the SFC.

SFC revenues are derived from three main sources: an annual recurrent grant from Government approximately equal to the net cost to Government of running the former Office of the Commissioner for Securities and Commodities Trading, a levy (current rate 0.013%; of which the SFC receives 0.006%, and the SEHK 0.007%) on transactions recorded on The Stock Exchange of Hong Kong, and a levy (current rate $1 per contract) on both buyer and seller on transactions recorded on the Hong Kong Futures Exchange, and fees and charges for functions performed for specific identifiable market participants or users. From income over the years, the SFC had accumulated reserves of approximately $664.88 million as at 31 March 1997. The reserves are invested in accordance with guidelines approved by the Financial Secretary.

Following a review of the SFC's fees and charges which was undertaken with reference to the volume of work and anticipated level of expenses in the coming year, the scales of fees and charges which have not been revised since 1994/95, have been increased modestly to recover projected costs having regard to an assumed inflation rate of 7%. The revised scales under the Leveraged Foreign Exchange Trading Ordinance were effective from 1 April 1997. The revised fee scales under the Commodities Trading Ordinance and Securities Ordinance, and for the Corporate Finance and Investment Products Divisions, are scheduled to be effective from August 1997.

The 1997/98 Budget, approved by the Governor in March 1997, is based on a manpower plan of 276, an estimated operating expenditure of $339 million and a planned operating deficit of about $72 million. Despite the projected deficit, for the fifth time in as many years, the SFC decided to request Government not to apply to the Legislative Council for an appropriation from general revenue for 1997/98. The SFC noted, however, that a deficit would not have been projected had a request for an appropriation been made in accordance with the funding principles agreed by the Government and the Legislative Council when the SFC was established.

In addition to its own funds, four compensation and deposit funds are under the management of the SFC. They are the Unified Exchange Compensation Fund, Commodity Exchange Compensation Fund, Securities Dealers' Deposit Fund and Commodities Dealers' Deposit Fund. These funds totalled approximately $560.1 million as at 31 March 1997 (See paragraphs 4.22 - 4.25 and sections 10 and 11 : Compensation Funds Financial Statements ) The Finance Section is responsible for maintaining the books and records for the funds and assisting in the management of their investment in accordance with the principles governing the investment of the SFC's own reserves.

Administration Section

The Administration Section is responsible for property and security management, and for office services, supplies and facilities management generally. During the year, a lease renegotiation was conducted successfully for existing office premises at Edinburgh Tower and an office renovation project was undertaken.

Human Resources Department

Function

The primary function of the Human Resources Department is the maintenance of an efficient, productive and stable workforce throughout the SFC. In so doing, it aims to ensure a multi-jurisdictional and multi-disciplinary skills mix among staff and adopts a private sector ethos in managing and motivating staff with remuneration based strictly on performance.

Staffing

During the year 1996/97, the Commission experienced an increase in turnover, especially in the case of professional staff. Staff turnover for the 12 months ended 31 March 1997 was 17.59% for professional staff (cf 95/96: 10.12%) and 11.74% for general grade staff (cf 95/96: 10.26%), while the overall turnover was 14.86% (cf 95/96: 10.19%).

Training & Management Development

To promote the professionalism of SFC staff and to improve their effectiveness through training and development, training courses based on a Comprehensive Training Programme, which include a core programme of management and professional skills training and customised technical programmes for staff with particular needs, were arranged for staff during the year.

Competency Development Project

Pursuant to the SFC Corporate Plan, a Competency Development Project to specify the core competencies for different levels of staff was conducted during the year. The results form the basis of an integrated approach to different aspects of human resources management, particularly for the development of a more focused training and career development plan. The Project will be completed by mid-1997. In the meantime, views and comments collected during the Project have been drawn on to improve operational effectiveness and efficiency.

China Training

In further preparation for the 1997 transition, a series of Chinese Writing Skills courses were arranged in which 40 professional staff participated. Ongoing training in Putunghua was also arranged with 25 classes being held during the year for staff at various levels. Due to the increasing volume of SFC correspondence with China, two training programmes on Simplified Chinese Characters were implemented.

In order to acquire a better understanding of China's political system and government machinery, and to build contacts with our Mainland counterparts, the SFC, in association with a number of public bodies (the Stock Exchange of Hong Kong Ltd, the Hong Kong Futures Exchange Ltd, the Hong Kong Securities Clearing Company, the Hospital Authority, the Hong Kong Tourist Association and the Hong Kong Trade Development Council), developed a Hong Kong Public Bodies Executive Development Programme (PBEDP) in Beijing. During the year, 18 SFC professional staff participated in three two-week PBEDPs conducted by the National School of Administration (NSA) in Beijing.

After each of the PBEDPs, post-course delegation visits of about one week were arranged to various government authorities and financial institutions in Beijing and Shanghai.

In November 1996, a NSA delegation led by the School's Vice-President, Mr Tang Tiehan, visited Hong Kong. Three professors of the delegation team conducted two seminars on topical issues concerning China for about 250 executives of the public bodies listed above.

In addition to the PBEDP, the SFC organised four four-day training courses in Shenzhen for middle ranking and junior executives. The purpose of the courses was to provide the 80 participants with a basic understanding of the framework of government in China. Apart from the above, one Executive Director attended the Hong Kong Government Tsing Hua Programme, while four Directors attended the Hong Kong & Shanghai Bank Tsing Hua Programme.

Training for PRC Regulators

The 5th Secondment Programme for PRC Securities Regulators was jointly organised by the SFC and SEHK during the year. The Programme, sponsored by the Hong Kong Securities Training Sponsorship Foundation Ltd, was attended by a total of 16 officials from the China Securities Regulatory Commission, the Shanghai Securities Administrative Office, the Shanghai and Shenzhen Stock Exchanges, the Hong Kong & Macau Affairs Office, the Party School of the CCP Central Committee and the Securities & Exchange Commission in Taipei.

The SFC and the HKFE also jointly organised two one-week training programmes for 23 senior executives from 15 PRC futures exchanges.

Overseas Training and Secondment

To widen the SFC staff's exposure to securities and futures regulation in other developed markets, one executive was seconded to the National Association of Securities Dealers in Washington for two months. Nine others attended various training programmes (varying from one to three weeks) organised by overseas regulatory bodies including the SEC and CFTC in the USA, the Australian Securities Commission, and IMRO in the United Kingdom.

Internship Programme

As part of the SFC's long term programme aimed at developing the pool of financial professionals in the Hong Kong market, an SFC Internship Programme was successfully introduced during the year. The Programme aims to equip high-calibre graduates with industry and regulatory knowledge. It will also enable the SFC to identify graduates with good potential for possible further employment at the SFC. Six fresh graduates from the local universities were recruited to the Programme in July 1996. A new group of interns will be recruited in July 1997.

Employee Relations

To foster communication and promote professional exchange, sharing sessions were held from time to time by senior executives of the SFC to brief staff on topical issues ranging from the strategic concerns of the SFC, to market integrity, listing policy, case studies and staff policy. A Human Resources Newsletter was issued periodically and talks were organised on health and recreational activities.

Secretariat

The Secretariat, which is mainly concerned with SFC corporate governance matters, services Commission Meetings and Committees of the Commission. A number of matters are statutorily reserved to the Commission, as opposed to the Executive. In addition, the Commission is responsible for determining strategic policies and objectives and monitoring achievement of those objectives and compliance with policies. Fourteen Commission Meetings were held during the year.

The five independent Non-Executive Directors, who have both the varied backgrounds and extensive experience necessary to ensure objectivity and to balance the interests of market practitioners, the investing public, and the community at large, play an important role in the checks and balances applicable to the internal management of the SFC. For example, they hold the Chairmanships, Deputy Chairmanships and casting votes on the Audit Committee (to which the external auditors have unrestricted access), the Budget Committee (which is responsible for the examination of the draft annual Budget before its consideration by the Commission), and the Remuneration Committee (which considers staff salary ranges, the remuneration of Directors being set by the Governor).

During the year, complementary to the normal external audit, external auditors completed specific reviews of the Commission's systems of internal control in connection with fee collection procedures, human resources systems including payroll and benefit procedures, and investment and safe keeping procedures, and in each case reported to the Audit Committee that the procedures were generally satisfactory.

The SFC Advisory Committee, which advises the Commission on all policy matters, met four times during the year. Topics discussed by the Advisory Committee include the Rationalisation of Securities and Futures Legislation, an Investor Survey, Short Selling, the Strategic Plan of the Hong Kong Futures Exchange, Proprietory Trading Systems, Leveraged Spot Gold Contracts, the Leveraged Foreign Exchange Trading Regulatory System, Inter-market Coordination, Listed Company Communications, and Management Supervision and Internal Control Guidelines for Registered Persons/Licensed Traders.

The Management Committee, which comprises senior executives and exercises administrative, financial and housekeeping management powers delegated to it by the Commission, held 13 meetings during the year.

Information Resources Department

The Information Resources Department is responsible for the administration of the SFC's technology infrastructure and Corporate information base. It also provides all aspects of technology-related support to the SFC.

The year saw the beginning of Stage One of the five-year Information Systems Strategic Plan. The theme of Stage One was to upgrade the SFC's basic technology infrastructure to meet the increasing demand in processing capacity, to improve internal and external communications and to rebuild the Licensing Application Processing System. Five major projects - the SFC Internet Web site, a Network Fax System, a Mainframe Computer Upgrade, an Automatic Voice Response System, and an Internet Email System - were implemented during the year. Development work on another major project, the Licensing Application Processing System Rebuild, is in progress.

The Mainframe Computer (IBM AS/400 System) was upgraded in July 96 to meet the increasing demand for computing capability. The machine upgrade also positioned the SFC to a more up-to-date technological architecture.

An Automatic Voice Response System (the SFC Infoline) was launched in November 1996. The public can call the Infoline at 2840-9393, 24 hours a day, to obtain information about the SFC. The Infoline also includes a 'fax-on-demand' facility, allowing the public to obtain 'fact sheets' via fax.

The In-house Email System was enhanced to enable global communications by integration with the Internet in January 1997. SFC PC users can now communicate by electronic mail from their desktops with colleagues via the in-house network and with other organisations and individuals on the Internet.

The Licensing Rebuild project aims to improve the user-friendliness and system performance of the existing Licensing Application Processing System by redesigning the user interface and enhancing management information reporting under a graphical based client/server environment. The project began in March 1997 and is due to be completed in 1998.