HONG KONG (Reuters Breakingviews) – Running Hong Kong’s securities regulator is not a job for the fiercely ambitious. Ashley Alder, who has helmed the Securities and Futures Commission for eight years, is stepping down in 2020 having won some moderate battles and lost some bigger ones. The job he vacates is unique in financial regulatory circles, but not really in a good way.
Alder lasted longer than his predecessor Martin Wheatley, who left after just five years, but didn’t necessarily achieve much more. One of the defining debates of his tenure was the question of whether to let companies list on the city’s stock market with multiple classes of shares, a classic way of giving founders control beyond their economic stakes. Alder’s SFC rejected a proposal to allow them in 2015, but Hong Kong’s stock exchange and the city’s government had other ideas, and the regulator caved last year.
More successful was Alder’s pursuit of underwriters for their shoddy work on initial public offerings – which slapped UBS with a one-year ban on sponsoring market debuts and fined the Swiss bank and others for questionable work on the IPOs of China Forestry and Tianhe Chemicals. In 2017 the city also made banks’ senior managers personally responsible for negligence.
One problem is that the wheels of justice in Hong Kong still grind painfully slowly. The fines on banks like Morgan Stanley, UBS and Standard Chartered levied this year were for IPOs that happened more than five years ago. There are wider challenges too: for example, the city still doesn’t have a proper system in place for investors to sue companies through class-action lawsuits.
Whoever replaces Alder will be saddled with the same wonky system. Hong Kong listings are governed by a listing committee under the exchange – itself a profit-driven listed company. That’s different from London or New York, where public-sector bodies have oversight. The regulator is also caught between the city’s tycoons, a wall of companies and capital from mainland China, and an irascible retail investor market. A successful SFC chief is someone who can navigate that tricky arrangement, not fix it.