Hong Kong’s Securities and Futures Commission is seeking a new chief executive officer as Martin Wheatley ends a six-year tenure marked by a crackdown on market misconduct and the global financial crisis.
Wheatley, 51, who joined the regulator in 2005 and became CEO the following year, will leave in June to return to the U.K., he told a news conference in Hong Kong yesterday. His departure is a “personal decision,” Wheatley said.
Under Wheatley, the SFC secured Hong Kong’s first jail sentence for insider trading, won a court battle against billionaire Richard Li’s PCCW Ltd., and strengthened investor protections amid controversy over the mis-selling of notes linked to bankrupt Lehman Brothers Holdings Inc.
“Next time they should cast a global net and find someone who has broader knowledge of financial services” said David Webb, a shareholder activist and former non-executive director of Hong Kong’s stock exchange. “Perhaps one of his weaknesses is that he was learning as he went along.”
Webb said Wheatley often took the path of least resistance. Under Wheatley, the regulator tried to mitigate perceived risks to investors from United Co. Rusal by “prohibiting the company from conducting a public-offer tranche and imposing an artificially high board lot size,” when it could have rejected the listing outright, Webb said.
Wheatley is leaving three months before his contract expires in September to take a job at a European securities regulator, Hong Kong’s Standard newspaper said today, citing unidentified people.
Stephen Birkett, a Hong Kong-based partner at law firm Morrison & Foerster LLP, who worked in the corporate finance division of the SFC between 2005 and 2008, said: “Making this announcement six months ahead of his departure achieves the dual purpose of giving the organization time to plan for the successor and lets the market know he’s available next June.”
Wheatley, at the news conference, declined to speculate on who his successor will be, and said he hoped to have rule changes on credit-rating companies and additional reporting requirements in place before his departure.
Other changes, including providing legal backing for requiring the disclosure of price sensitive information, won’t be completed during his time, Wheatley said.
“I would certainly make as much progress as I can before I depart, but those policies go on, those projects go on,” Wheatley said. “Regulatory structures are always a work in progress.”
The SFC in 2009 went to court and succeeding in blocking the attempt by Li, a son of Hong Kong’s richest man Li Ka-shing, to take PCCW private, saying a shareholder vote had been manipulated. The SFC also secured Hong Kong’s first jail sentences for insider trading in 2009.
“It is essential to have someone who upholds laws without fear or favor,” said lawmaker James To. “Hong Kong needs people like Mr. Wheatley, who was not affected by the influences of tycoons or large corporate firms.”
In response to a public outcry over $1.8 billion of Lehman- linked structured products that became worthless with the demise of the bank, the regulator brokered a deal along with the Hong Kong Monetary Authority in which 16 banks agreed to buy back the products, called “minibonds,” from investors.
“He has proved to have a steady hand on the Hong Kong regulatory tiller during his term here,” said Alan Ewins, Allen & Overy LLP’s Asia Pacific regulatory group head. Reconciling global regulatory developments, regional market competition and local issues is a concern for Wheatley’s successor, he said.
Loss to SFC
K.C. Chan, Hong Kong’s acting financial secretary, called Wheatley’s departure “a loss to the SFC,” and said he had led the government agency in strengthening the regulatory framework after the 2008 international financial crisis. Chan’s comments were distributed in a Hong Kong government news release.
Wheatley was deputy director of the London Stock Exchange from 2001 to 2004.
Wheatley’s replacement will take over securities regulation of a city integrating more closely with mainland China. Chinese companies accounted for 46 percent of the HK$20.64 trillion ($2.66 trillion) capitalization of the Hong Kong stock exchange’s main board as of the end of October, up from 16 percent in 1997, according to exchange data.
Hong Kong is also developing itself into an offshore center for trade in yuan currency and bonds. Deposits of the Chinese currency in Hong Kong jumped 45 percent in October to a record 217 billion yuan, the Hong Kong Monetary Authority said Nov. 30.
China connections would be “good” for Wheatley’s replacement, said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment Trust, which oversees about $72.1 billion in assets.
“What’s most important is to maintain a fair and open environment for Hong Kong’s market to continue to develop as an international financial center,” Dan said. “The biggest issue is transparency and regulation. There’s still room for improvement.”