Depending on the nature of the proposal, the SFC will consider whether it should hold joint discussions with other regulators or authorities, eg, the Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority.
The SFC may meet with relevant industry representatives and working groups to discuss proposals. Before finalising a consultation paper. We solicit views from a mix of industry participants as well as advice from other bodies1 . The SFC also holds regular meetings with industry bodies2 at which proposals may be discussed.
The SFC also considers whether or not a proposal requires public consultation. Only in very limited circumstances will we dispense with public consultation in favour of a proxy form of public consultation (eg, a focused consultation of interested parties). Such circumstances might include where the proposed changes are minor and uncontroversial or where a delay in implementing a proposal would not be in the interest of the investing public or the public interest.
Why we consult the public
We advocate regulatory transparency. One way of achieving this is through conducting public consultations on regulatory proposals.
Public consultation helps market participants understand the goals of our proposals and enables them to contribute to creating and maintaining an effective regulatory regime. It also assists us in our decision-making process, ensures that our proposals meet the needs of the market and the investing public, and enhances our accountability.
Our ongoing and completed consultations are available in the "Consultations and conclusions" section of our website.
What we are required to do
The SFC has the power to make rules under various provisions of the SFO. Section 398 of the SFO requires us to consult the public (and also the Hong Kong Monetary Authority (HKMA) in certain circumstances) if we propose to make such rules. We are required to publish:
- a draft of the proposed rules for consideration by the public;
- an account setting out in general terms the public's representations on the draft rules and our response to the representations; and
- details of rule amendments which in our opinion may result in the rules being significantly different from the draft.
The SFO also specifies certain limited circumstances when public consultation is not required, ie, if it is inappropriate or unnecessary or if the delay involved in consulting the public would not be in the interest of the investing public or in the public interest.
What we do in addition
We consistently exceed statutory requirements for consulting the public on rules we propose to make under the SFO by consulting both on proposed non-statutory codes and guidelines and on amendments to them. Our consultation documents are readily accessible to the public on our website and we arrange for comments to be received by mail, fax, email, and via the website.
During the consultation process, our practice is to conduct various rounds of both formal and informal consultations with relevant stakeholders to seek their views on our proposals. We carefully consider all feedback received. To ensure transparency, we summarise the suggestions in the consultation conclusions paper and provide our comments on them (including reasons why particular suggestions are not adopted).
Consultation procedures
The main features of our procedures are set out below:
1. Pre-consultation
2. Consultation
The SFC prepares a consultation paper containing a detailed description of the proposal and the reasons for introducing it; the draft text of any new or revised rules, codes or guidelines related to the proposal; and contact details where comments may be sent.
A press release is issued when a public consultation begins. Consultation papers are available in Chinese and English on our website.
The SFC tries to allow sufficient time for the public to comment on our proposals. In setting the duration of the consultation period, we take into account factors such as the urgency and complexity of the proposals and whether they are likely to be controversial. During the consultation period, the SFC may hold seminars and meetings with selected stakeholders and working groups to explain our proposals and to seek feedback.
3. Analysis
The SFC carefully considers all comments received during the consultation process and assesses the level of market support for the proposal. We then consider whether or not the proposal needs to be amended in light of comments received. If so, the rules, codes or guidelines in question are amended accordingly.
4. Conclusions
Depending on the subject matter, the SFC may consult relevant industry working groups prior to finalising a conclusions paper.
After we complete our analysis, we prepare a consultation conclusions paper summarising the main comments received from the public and setting out our responses and conclusions (including whether the comments are accepted, the reasons for any non-acceptance and details of additional amendments to the proposals).
We also issue press releases to inform the public about consultation conclusions. Conclusions papers, in Chinese and English, are posted on our website. In many cases, copies of the submissions received from members of the public are also featured on the website (except where a respondent has withheld permission to do so).
1 Eg, the SFC's Advisory Committee or Public Shareholders Group or the Consumer Council.
2 Eg, broker associations.
Last update: 19 Nov 2019