The 2000-01 Budget turned out to be a non-event as predicted. The
unexpectedly strong stock market has helped to paint a better Budget
picture at the end of the fiscal year on 31 March 2000. The new
Committee on tax review will have to find a way forward and shoulder
some of the political heat next year.
The Taiwan election fore-shadowed much of the political discussions
during the second quarter this year. The historically low popularity
of the Chief Executive and the approaching election of the Election
Committee are gradually attracting some attention more recently.
My Motion Debate on the 'management of risks of IT stocks' was
well timed in that we had just seen the roller-coaster action at
work on IT stocks worldwide. It also gave the accountancy profession
a platform to proactively explain our proper role and perceived
predicaments on public record in advance of any trouble.
Professional responsibilities and self-regulation had also attracted
much publicly in the last few months. The piling saga of the Housing
Authority, the controversial disciplinary hearing of the Medical
Council and the continue professional education and assessment of
our teachers were all widely publicised. We should reflect on these
events and to take note that professional issues may not always
be dealt with 'in-house'. Professionals must be prepared to take
on greater transparency and increasingly higher public responsibilities
in a politicised environment.
II. Committees and Panels
||Public Accounts Committee (PAC):
||On 15 March, the Director of Audit tabled his
Report No. 34 in the Council. The Report No. 34 contains 8 chapters.
The Committee, after holding 3 public hearing sessions to receive
evidence from Controlling Officers, have met 9 times to finalise
our own independent report. I intend to present the PAC Report
to LegCo on 21 June 2000.
The Committee has also concluded the outstanding Reports
on Chapters 1, 4 and 12 of the PAC Report No. 33, i.e. "The
Refuse Collection Service of the Urban Service Department",
"Management Practices of the Vocational Training Council"
and "Water Purchased from Guangdong Province" respectively.
Despite of its highly controversial contents, all concerned
parties have accepted its conclusions and recommendation.
In particular, there were highly visible follow up actions
taken by the Administration on the 'Water Purchase' issue.
||Financial Affairs Panel:
||The Panel held 4 meetings since the last report
and the relevant agenda are attached as Appendix I.
On 13 March 2000, the Chairman of the Securities and Futures
Commission (SFC), Mr. Andrew L T SHEUNG, and the Chief Executive
of the Stock Exchange of Hong Kong, Mr. Alex TUSI have provided
the Panel with a report on the listing requirements and subscription
arrangement for shares on the Growth Enterprise Market. The
meeting was widely reported and in particular, SFC has publicly
criticised BNP Prime Peregrine Securities for the company's
poorly organised settlement arrangements in the Tom.com's
listing during February.
The Financial Secretary (FS) also briefed the Panel on macro
economic issues on 5 June 2000 and he had also made use of
the occasion to consult members on the expenditure proposals
for the 2001-02 Budget.
A proposed list of future agenda items is attached as Appendix
II for reference.
||Welfare Services Panel:
||The Panel held 6 meetings since the last report.
The Panel focused on the social welfare subvention reform; the
social welfare services for squatter areas in the New Territories
and the "Promoting Self-reliance" strategy. It also
discussed the career support services; the support services
for streetsleepers; the proposed lump sum funding system; the
assistance provided to the blind or visually impaired persons
in processing and accessing information on the computer; the
review of family services and the various other issues arising
from the comprehensive review of CSSA.
There were 2 joint meetings with Panels on Manpowers to discuss
the research study on unemployment benefits systems on 2 June
2000 and 13 June 2000.
||Economic Services Panel:
||The Panel held 3 meetings since the last report.
The Panel discussed the development of logistic management centres
in Hong Kong, the prohibition on the use of flueless gas water
heater, the retail price of industrial diesel, aviation safety
and the Hong Kong international airport.
It also studied the Hong Kong Disneyland (Disney Theme Park),
the retail and wholesale prices of major fuels, the interconnection
and competition in the electricity sector in Hong Kong as
well as the revision of Government fees and charges.
||Information Technology and Broadcasting
||The Panel held 4 meetings since the last report.
The Panel mainly focused on the Y2K monitoring and co-ordinationg
arrangements for roll-over to 29 February 2000, the registration
of Internet domain names, the third generation mobile phone
and the Film Development Fund. It also studied the progress
of the Cyberport projects; the consultation paper on the Control
of Obscene and Indecent Articles Ordinance; the proposed revision
of Government fees and charges under the purview of the Information
Technology and Broadcasting Bureau and its departments, hacking
and virus activities and preventive measures; industry consultation
on licensing framework for Third Generation Mobile Services
as well as the public consultation on the administration and
assignment of Internet domain names and Internet protocol addresses
in Hong Kong.
||Finance Committee and House Committee:
||There were 8 meetings of Finance Committee (including
4 special meetings with 18 sessions from 21 to 24 March 2000
to examine the draft Estimates of Expenditure 2000-01 as well
as one special meeting to enable Members to express their views
on the expenditure proposals for 2001-02 Budget on 5 June 2000)
and 11 meetings of House Committee.
TD of HKSA were kept informed of progress on all Bills on
a weekly basis and I held two separate stocktaking meetings
with the Secretariat on 16 March 2000 and 2 May 2000 to closely
monitor progress of all HKSA submissions. I plan to hold one
more such meeting to wrap-up this LegCo session before the
end of the month.
III. Bill Committees Joined
||Telecommunication (Amendment) Bill 1999
||The Bills Committee has held a total of 22 meetings. Apart
from discussing the Bill with the Administration, the Bills
Committee has also met with 21 deputations from the telecommunications
industry, tunnel operators and other interests parties to receive
Considering the proposed section 7H (tariffs and price control),
HKSA suggests that "accounting practices" in the
first line and second line should be replaced by "accounting
policies": and "accounting principles" respectively.
Appropriate amendment has now been made.
With regard to the Section 35A (inspection of records, documents
and accounts), HKSA considers that Telecommunication Authority's
(TA) powers to enter the premises of a licensee and to inspect
and make copies of documents, etc. too broad. Amendments have
been made to restrict the scope to within the Ordinance's
HKSA also considers that Section 36D provisions will be unfair
to non-licensees in that the grounds or purposes for which
TA requires the information are very wide. Besides, TA is
not under any confidentiality obligation in respect of the
information he obtains. Since the order can be applied by
TA ex parte, the non-licensees are not given any prior opportunity
to respond to TA's demand for information and that their only
course of redress is to seek a judicial review on the magistrate's
decision to issue the order. Substantial amendments have now
been made to require TA to give notices to concerned parties,
receive representation and to submit same to the magistrate
for his consideration and further action. TA is also now required
to keep the information so obtained confidential and the third
party is explicitly excluded from such civil claims and liabilities.
The amended Bill was passed on 7 June 2000 without further
||Securities (Amendment) Bill 1999
||The Committee have held 5 meetings to discuss with the Administration
and have also invited industry representatives, legal professionals
and concerned organisations to give their views on the Bill.
The Bill seeks to strengthen the regulation of short selling
in Hong Kong to safeguard the markets from the failure of
price-discovery and lack of transparency brought about by
non-compliance with the disclosure rules of short selling.
HKSA made no significant comment.
The Bill was passed on 17 May 2000.
||Companies (Amendment) Bill 2000
||The Bills Committee held 5 meetings with the Administration
since the last report. The objective of the Bill is to
amend the Companies Ordinance (Cap. 32) ("the Ordinance")
in order to ¡V (a) implement the recommendations of the Law Reform
Commission of Hong Kong ("CRC") in its Report on Corporate
Rescue and Insolvent Trading; (b) implement the recommendations
of the Standing Committee on Company Law Reform ("SCCLR")
and (c) effect miscellaneous amendments to various other sections
of the Ordinance.
In view of the complexity and the significant changes that
this legislation will bring to the existing regime of insolvency
practices, the Committee feel that we do not have sufficient
time to study that part of the 'corporate rescue' procedures
properly. We have decided to shelf the relevant parts of the
legislation for further consideration till next LegCo. The
Insolvency Practitioners Committee made a comprehensive and
detailed submission and they have agreed it best to stall
scrutiny of the Bill. Given the present requirement of the
Bill to pay all workers' wages before launching a legitimate
'corporate rescue', it can only work in rare circumstances.
The Bill also require significant refinement before the Committee
can give support. There is also an extremely late submission
by the HKSA to S.228 of the Bill which is now being sorted
out with the Administration.
The Committee suggested that the expected date for resumption
of Second Reading should be 21 June 2000.
||Building Management (Amendment) Bill 2000
||The Bills Committee has held 9 meetings with the Administration.
The Bill is to amend the Building Management Ordinance (Cap.
344) ("the Ordinance") to provide for: (a) specification
of building management and maintenance standards for compliance
by owners' corporations ("Ocs"); (b) mandatory management
of buildings with serious management and maintenance problems;
(c) simplifying the manner for owners of new building to convene
meetings to appoint management committees; and (d) miscellaneous
matters relating to insurance, auditing of OC's accounts, notice
of owner's meeting and quorum at a meeting of OC.
HKSA made a written submission to the Bill. HKSA had proposed
technical amendments to section 27(1A) concerning audit reporting
requirements. These amendments have now been accepted by the
Administration and CSA's will be moved in due course.
||Securities and Futures Legislation (Provision of False
Information) Bill 2000
||There were 5 meeting held since the last report. The objective
of the Bill is to amend the Securities and Futures Commission
Ordinance (Cap. 24), the Commodities Trading Ordinance (Cap.
250), the Stock Exchanges Unification Ordinance (Cap. 361),
the Securities and Futures (Clearing Houses) Ordinance (Cap.
420) and the Exchange and Clearing Houses (Merger) Ordinance
(12 of 2000) to make the provision of false, misleading and
incomplete information to the relevant authority a criminal
offence whether the person is providing the information under
a statutory obligation or in other circumstances.
HKSA made 2 written submissions to the Bill. Under clause
2, proposed section 56A(2), HKSA are concerned, in particular,
with the references to providing information that is "connected
with" the performance of a function of the relevant authority.
This is a vague and potentially wide test.
Under the proposed section 56A(2)(b)(i) and (ii), HKSA considered
that whereas the term "misleading" is used in paragraph
(i), "inaccurate" is used in the negatively-worded
provision in paragraph(ii). However, unlike "true/false"
and "complete/incomplete", "misleading"
and "accurate" cannot be said to be direct opposites.
This apparent discrepancy may create confusion.
The Administration has amended the Bill to use the words
"false or misleading" to describe information that
is intended to be caught by the proposed offences. The scope
of Section 56A(2) is now a subject for further negotiation
with the Administration who is unwilling to compromise.
||Urban Renewal Authority Bill
||The Bill is to repeal the Land Development Corporation Ordinance
(Cap. 15) and to provide a legislative framework for the establishment
and operation of the Urban Renewal Authority.
HKSA made a written submission to the Bill. Under clause
15 (Debt of Authority), HKSA commented that the accounting
and auditing requirements as presently drafted are too brief
and loose. The Administration has agreed to address these
concern with our proposed CSAs.
||The objective of the Bill is to implement the policy recommendations
arising from the 1998 Review of Television Policy following
the consultation on proposals set out in the consultation paper
entitled "1998 Review of Television Policy" issued
by the Information Technology and Broadcasting Bureau in September
1998 with a view to ¡V (a) widening programme choice; (b) encouraging
investment, innovation and technology transfer in the broadcasting
industry; (c) ensuring fair and effective competition in the
provision of broadcasting services; (d) ensuring that broadcasting
services do not offend public taste and decency; and (e) promoting
the development of Hong Kong as a regional broadcasting and
HKSA made a written submission to the Bill. Under clause
16 (Separate accounting), HKSA enquired under what circumstances
would the Broadcasting Authority (BA) direct a licensee to
adopt an accounting practice pursuant to Clause 16(2) of the
Bill. Amendments have been made to section 16(2)(c) by deleting
"practices" and substituting "principles",
to restrict the scope to the enforcement of the BA's powers.
The Administration has also voluntarily amended all relevant
sections with regard to access to information from third parties
to ensure consistency with the 'Telecommunication (Amendment)
Bill 1999'. (see paragraph (1) above)
The Bills Committee supports the resumption of Second Reading
debate on 21 June 2000.
||Subcommittee on Resolution under Section 3 of the Dogs
and Cats Ordinance (Cap. 167) and Dogs and Cats (Amendment)
Ordinance 1997 (97 of 1997) Commencement) Notice 1999
||The purpose of the Subcommittee is to seek the Legislative
Council's approval of the Dangerous Dogs Regulation ("the
Regulation") which provides for the control and regulation
of fighting dogs, large dogs and known dangerous dogs. I received
a number of representations from dog-owners within the Accountancy
The Regulation was finally approved on 17 May 2000 after
substantial improvements made to satisfy public concerns.
||Subcommittee on Securities and Futures Bill
||There were 4 meetings held on 11, 14, 27 & 28 April 2000
since the last report. The next meeting will be held on 19 June
2000 to meet the Administration. The Bill will not be moved
within this LegCo session. A submission from HKSA is still awaited.
I have urged the HKSA to suggest a policy wide procedure to
deal with access to working papers and records from third parties
like accountant to provide consistency and fair dealing of all
the regulators and departments concerned. Otherwise, our legislation
may be littered with many different versions of similar legislation
which will cause problem in future.
||Subcommittee on Financial Resources Rules, Commodities
Trading (Accounts and Audit) (Amendment) Rules 2000 and Securities
(Margin Financing) (Amendment) Ordinance 2000 (20 of 2000) (Commencement)
||The Subcommittee has held 2 meetings with the Administration.
The Subcommittee has only discussed the Financial Resources
Rules and has no objection to other Rules.
The Financial Resources Rules ("FRR") are subsidiary
legislation under the Securities and Futures Commission Ordinance
(Cap. 24). The aim of the FRR is to provide appropriate prudential
standards on the financial resources of market intermediaries.
One of the key objectives of the new FRR is to extend appropriate
financial regulation to securities margin financiers.
In the Subcommittee, I have made a brief statement on the
following line. HKSA will not oppose the passage of the FRR
because we identify with the aim of standardisation but would,
urges the SFC to actively investigate the possibility of information
technology applications; I also warned that HKSA may not be
able to have technical guidelines etc ready on time before
the effective data of implementation i.e. 12 June 2000; and
there will definitely be cost implications for the securities
industry but the extent of additional costs will depend on
the exact scope of the further audit works required which
can be significant.
The SFC and Subcommittee both recognised our position on
record and the SFC had promised further liaison with HKSA
through ASCI and CPD programmes.
The Subcommittee has not proposed any amendments. The commencement
date for these three pieces of subsidiary legislation is 12
V. Motion Debate
I moved a Motion Debate on 3 May 2000 which was duly passed with
little controversy. The contents of my speeches will be highlighted
in my circulars to members and Web page. A list of all other topics
are attached as Appendix III.
I have asked 6 questions (2 questions for the Growth Enterprise
Market, 2 questions for the air pollution, 1 question regarding
the drafting of Bills on regulation of Financial market and the
other is for the hiring of Certified Public Accountants by SFC)
since the last report which are attached as Appendix IV. The relevant
HKSA Committees may wish to be advised and to consider the replies
VII. General Political Background
With Legco in summer recess from 1 July 2000, the Administration
will be able to relax a little. The scence is likely to be set by
slinging matches amongst competiting politicians in high election
The development of a political relationship between the Mainland
and Taiwan, the China WTO entry and the Housing Authority's piling
saga are all likely to take more twists and turns which require
further observation. However, the HKSA should take this breathing
space to think hard and to build consensus amongst accountants on
difficult issues like the Securities and Future Commission (Amendment)
Bill and corporate rescue legislation. Once Legco resumes in October,
these important legislation will be rushed through leaving no time
for us to ponder.