The Securities and Futures Commission will include a revision of the commission system in consultations later this year on the code of conduct for bank staff who sell investment products.
"Any revision of the current system would be a complicated issue but a revision of the payment method certainly would be part of the consultation," SFC chief executive Martin Wheatley told lawmakers yesterday.
There might be a conflict of interest when bank staff sell investment products to clients and receive commission at the same time, Wheatley said.
Appearing at the Legislative Council for the fourth time in connection with the Lehman minibond controversy, he admitted the regulator is now working toward settlement with some banks. The government has urged the SFC to speed up the process.
"The financial secretary has [shown his] concern about the issue taking too long and asked [us] to do whatever we can to expedite the process," Wheatley said.
"But the lengthy process we now have with banks is not in investigation but in settlement. We do not have power over banks, therefore the settlement process is slow."
He said the regulator prefers banks to settle rather than take other means to resolve the issue.
But SFC acceptance of any settlement proposal would depend on three conditions - minimum loss to clients, punitive action and measures to prevent a repeat. Wheatley would not comment on recent reports that banks have proposed to pay an average of 60 percent to 70 percent of the principal invested to Lehman minibond investors, saying he would not negotiate through the media.
He wondered whether some parties are intentionally leaking details of talks in order to put pressure on the SFC.
The regulator would not use the 100 percent payback model as the only means of settlement, he clarified, nor accept an offer to repay less than 60 percent of the principal invested.
Wheatley declined to disclose the investigation process involving 19 banks, saying any comment at this stage would not be fair.
The SFC executive director of corporate finance division Brian Ho will attend the Legco hearing next Friday.
The Article: SFC Target Commission System
Katherine Ng, The Standard Hong Kong
Wednesday, July 08, 2009