When you purchase publicly-listed companies share through securities dealers either for investment or speculative purpose, have ever thought about the financial standing/integrity of these securities healers before placing your order with them?
While I have not conducted a survey on this issue, I would guess that 99% of the investors in shares would not consider this as an important issue to their investment decisions. Why? Don’t they know that if the securities dealers they are dealing with go bust or going into some sorts of financial troubles, they may not be able to recover their shares (held in custody with the dealers) and their monies from the dealers. They all know that the frequency of the external audit done by outside professional accountancy firms on the securities dealers is just once a year, then how could they be sure that the financial standings of the securities dealers are sound and well thought the rest of the accounting year after the external audits?
This report attempts to answer this question and study the roles and functions played by the Stock Exchange of Hong Kong in regulating the financial standings and the code of conducts of its members. Particular attentions would be paid to the audit procedures that the Exchange is currently using in checking whether its members have at all times satisfied the financial requirements imposed by both the Exchange’s own Rules and the Securities Ordinance. This is explained from Chapter III to Chapter IV.
A deal case study in then provided in Chapter V to describe the actual calculation of the financial requirements imposed by the Exchange and the Securities Ordinance. The author, once again takes that opportunity to thank the Exchange’s provision of the relevant data and its permission to allow him to follow its audit team all the way through until all the audit work on that particular member is completely done. However, to conceal the identity of the member, its name is not disclosed.
A brief description on the history, management structure and membership of the Exchange is contained right at the beginning of this report in Chapter I and II in order to provide some background information first. Then followed by Chapter III about the existing regulatory and legislative requirements presently imposed on the securities dealers.
A conclusion is then drawn up in Chapter VI to assess whether the present regulatory functions of the Exchange is sufficient enough to ensure that its member are at all times in compliance with its financial requirements and that their code of conducts is acceptable.