Corporate Resources Division

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FUNCTIONS

7.1	The primary objective of the Corporate Resources Division is to facilitate the efficient functioning of the SFC by providing appropriate support services at reasonable cost. Major responsibilities include financial control, budgeting, 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 AND ADMINISTRATION DEPARTMENT Finance Section
7.2	The Finance Section is responsible for the day-to-day administration of the finances of the SFC.
7.3	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 levy rate at 0.013%; of which the SFC receives 0.006%, and the SEHK 0.007%) on transactions recorded on the SEHK, and a levy (current rate at $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
7.4	With effect from 1 April 1998, the levy rate for transactions recorded on the SEHK is reduced from 0.013% to 0.011%, of which the SFC receives 0.004% and the SEHK 0.007%.
7.5	A proposal to increase fees for services rendered by the Intermediaries Division and Corporate Finance Division was put forth in September 1997 and again in March 1998 but repealed by the Provisional Legislative Council.
7.6	From income over the years, the SFC has accumulated reserves of approximately $965 million as at 31 March 1998. The reserves are invested in accordance with guidelines approved by the Financial Secretary.
7.7	The 1998/99 Budget, approved by the Chief Executive in March 1998, is based on a manpower plan of 310, an estimated operating expenditure of $413 million and a planned operating deficit of about $44 million. Despite the projected deficit, for the sixth time in as many years, the SFC decided to request Government not to apply to the Provisional Legislative Council for an appropriation from general revenue for 1998/99. 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.
7.8	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 $598 million as at 31 March 1998. (See paragraphs 4.42 to 4.46 and sections 11 and 12: Compensation Fund 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.
7.9	During the year, complementary to the normal external audit, external auditors completed reviews of the SFC's systems of internal control in connection with travel and entertainment expenditure procedures, fee collection, Corporate Finance Division procedures, fixed assets acquisition and insurance policy, banking and investment procedures, appointment of external consultants (legal and non-legal), and licence application and revocation procedures, and in each case reported to the Audit Committee that the procedures were generally satisfactory.
Administration Section
7.10	The Administration Section is responsible for property and security management, and for office services, supplies and facilities management generally. During the year, an office renovation project was undertaken by the SFC.
HUMAN RESOURCES DEPARTMENT
7.11	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
7.12	With the financial turmoil in Hong Kong, staff turnover slowed down in the second half of the year. Staff turnover for the 12 months ended 31 March 1998 was 12.57% for professional staff (cf 96/97: 17.59%) and 10.79% for general grade staff (cf 96/97: 11.74%), while the overall turnover was 11.76% (cf 96/97: 14.86%).
Competency Development Project
7.13	Pursuant to the SFC Corporate Plan, a Competency Development Project to specify the core competencies for different levels of staff was completed during the year. The results form the basis of an integrated approach to human resources management, particularly for the development of a more focused training and career development plan. Views and comments collected during the project have helped to improve operational effectiveness and efficiency.
Training and Management Development
7.14	To promote the professionalism of SFC staff and to improve their effectiveness through training and development, training courses based on the Comprehensive Training Programme were arranged for professional and general staff during the year. The courses include a core programme of management and professional skills training and customised technical programmes for staff with particular needs.
Professional and Industry Training
7.15	The professional and industry training for SFC executives is comprised of two programmes: a Securities Industry Basics Programme which provides executives with knowledge of the environment and regulatory framework of the securities and futures market; and a Securities Core Programme which provides more in-depth knowledge in respect of the market. The latter programme consists of six modules, covering topics such as investment analysis, financial mathematics, financial laws, etc. In addition to the above, an 'Accounting for Non-Accountants Programme' was also designed and implemented during the year.
China Training
7.16	During the year, the Department continued its efforts on China Training, aiming to enhance the working relationship with the SFC's Mainland counterparts. Ongoing training in putonghua was arranged with 25 classes held for staff at various levels. A Chinese Writing Skills Workshop was also conducted during the year.
7.17	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 (SEHK), the Hong Kong Futures Exchange Ltd (HKFE), the Hong Kong Securities Clearing Company, the Hong Kong Tourist Association and the Hong Kong Trade Development Council -- organised a Hong Kong Public Bodies Executive Development Programme (PBEDP) in Beijing. During the year, six SFC professional staff participated in the two-week PBEDP conducted by the National School of Administration in Beijing.
7.18	Before the PBEDP, pre-course delegation visits of about one week were arranged to various government authorities and financial institutions in Beijing and Shanghai.
7.19	In addition to the PBEDP, the SFC organised three-day training courses in Shenzhen for middle-ranking and junior executives. The purpose of the courses, attended by 33 executives during the year, was to provide participants with a basic understanding of the government framework in China. Three senior executive staff also attended the Hongkong Bank Tsing Hua Programme.
Training for PRC and Overseas Regulators
7.20	The 6th Secondment Programme for PRC Securities Regulators was jointly organized by the SFC and SEHK. The Programme, sponsored by the Hong Kong Securities Training Sponsorship Foundation Ltd, was attended by a total of 12 officials from the China Securities Regulatory Commission, the Shanghai and Shenzhen Stock Exchanges.
7.21	In accordance with a Memorandum of Understanding signed between the SFC and the State Administration of Foreign Exchange (SAFE) in December 1996, the SFC and SAFE will consult and co-operate in the training of personnel. A one-month training programme for SAFE officials was held from 22 September 1997 to 17 October 1997. The Programme was comprised of visits to local financial institutions and lectures conducted by SFC staff, the SEHK, HKFE and the Hong Kong Monetary Authority.
Overseas Training
7.22	To broaden the SFC staff's exposure to securities and futures regulation in other developed markets, one senior director was seconded to the London Takeovers Panel for two weeks. Ten others attended various training programmes organised by overseas regulatory bodies including the SEC and CFTC in the USA, the Australian Securities Commission and the UK Treasury.

Internship Programme
7.23	As part of the SFC's long-term programme aimed at developing a pool of financial professionals in the Hong Kong market, an SFC Internship Programme was conducted again 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. Seven fresh graduates from the local universities were recruited to the Programme in July 1997.
Employee Relations
7.24	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 to inform staff of current HR issues. Talks on health and recreational activities were also organised periodically to promote employee relations.
7.25	To convey the SFC's care and concern for the needy in the society, a Greening for the Chest Programme was conducted in November 1997, during which donations totaling of HK$38,888 from SFC staff were raised. The SFC also participated in the Dress Chinese Day and Dress Casual Day organised by the Community Chest, and the donation campaign for Huibei Earthquake victims.
SECRETARIAT
7.26	The Secretariat, which is mainly concerned with SFC corporate governance matters, services Commission Meetings and Committees of the SFC. 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. Seventeen Commission Meetings were held during the year. The minutes of all Commission and Committee Meetings are circulated to all Directors and the minutes of Commission meetings are formally confirmed at the following Commission Meeting.
7.27	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, also 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 Chief Executive of the HKSAR).
7.28	Members of the SFC Advisory Committee are appointed by the Chief Executive of the HKSAR after consultation with the Commission. The Committee, which is required by law to meet at least once every three months, met four times during the year. The Committee advises the Commission on policy matters at the request of the Commission as well as providing a forum in which industry and market participants may raise matters of mutual interest. Topics discussed by the Advisory Committee during the year included offer mechanisms for new listings; management supervision and internal control guidelines for registered persons/licensed traders; establishment of the Hong Kong Securities Institute; the proposed Investment Resources Centre; Hong Kong Market Conditions, September - December 1997; action taken regarding Peregrine Group and CA Pacific Group; and proposed changes to the Unified Exchange Compensation Fund.
7.29	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
7.30	The Information Resources Department is responsible for the effective management of the SFC's technology infrastructure and corporate database.
7.31	An in-house website was established in May 1997 to replace the existing one whose server was located at the Chinese University of Hong Kong. In conjunction with the relocation, the website contents were completely revised. The new English version was launched in May 1997 and the Chinese site in March 1998.

7.32	A new network combining voice and data signals to give flexibility in relocating computers and telephones lines within the SFC premises was installed in July 1997. A new network management software which could detect and detach problematic PCs on the network was also implemented to enhance the reliability of the network operations.
7.33	A Document Archiving System, which replaced the microfilming facility was installed in August 1997. The ability to store obsolete documents as digitised images has significantly enhanced the ease of file retrieval and produced savings in storage space.
7.34	A Document Management System, which integrated existing text and image based systems into a single system was implemented in November 1997. A one-step information search giving it access to information bases which are stored in different servers is now possible.
7.35	Since July 1996, the SFC has looked into the issue of Year 2000 readiness for computer programs as part of its system maintenance and development activities. A project to revamp all the existing systems to ensure Year 2000 readiness was initiated in July 1997.
7.36	The Licensing Rebuild project, which aims to improve user-friendliness and system performance by converting the existing software to a client/server based application, was in its final stage of development and was expected to go live in April 1998.