As Hong Kong's stock market struggles to shed its Wild West image, the city can count itself lucky to have an out-of-town sheriff policing its markets: Andrew Sheng, chairman of the Securities & Futures Commission. Sheng is an ethnic Chinese Malaysian who began his career at Malaysia's central bank, where he worked his way up to chief economist before joining the World Bank in 1989. After a five-year stint at the Hong Kong Monetary Authority, Sheng took over as SFC chairman in October, 1998, the low point of the Asian meltdown.
He immediately set out to revamp Hong Kong's crazy quilt of securities laws and as chairman of a government task force, has led a crusade to bring the laws up to international best practices. The two-year effort now awaits approval by Hong Kong's Legislative Council, which is scheduled to take up the bill later this year.
In Hong Kong, where stock market scamsters generally are let off with the mildest of slaps on the wrist, the new law will make insider trading a criminal act rather than merely a civil violation. Just as important, the omnibus Securities & Futures Bill marks a philosophical shift toward more disclosure and greater transparency. "Good, reliable, and timely information is a market fundamental," preaches the 53-year-old Sheng.
Sheng hasn't been standing still while the legislation is pending. Since taking office, he has introduced a slew of new disclosure rules for listed companies governing everything from connections to a business group to outlining for shareholders possible liabilities associated with investments in joint ventures. He's spearheaded the push toward a more U.S.-style disclosure-based system for the city's second bourse, the Growth Enterprise Market (GEM), rather than simply relying on outside enforcers from the stock exchange or his own SFC.
Sheng is a believer in the "buyer beware" school of investing, but he's determined that investors know a lot more than they have in the past. The need for "improved transparency is very much a lesson we drew from the Asian crisis," says Sheng. "We are living in a global market world which, unfortunately, has local regulatory frameworks and practices."
Not everybody likes Sheng's attempt to raise the bar of what's acceptable in securities and futures markets. His aggressive stance has earned brickbats from some in Hong Kong's tight-knit financial community. A senior stock exchange official accuses the SFC of taking an unduly harsh line toward GEM and "ruling for the sake of ruling rather than [doing] what's important for Hong Kong."
Sheng doesn't see things that way. Nor do most of the foreign investors and investment banks that are playing an increasingly important role in Hong Kong. Most of them would agree that Malaysia's loss has been Hong Kong's gain.