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Request for Endorsement of HAMS (Hong Kong Association of Minority Shareholders)

27 September 2001

Mr David M Webb
Editor
Webb-site.com
Hong Kong

Dear Mr Webb,

We are replying to your letter of 30 July 2001 inviting us to support HAMS.

We are pleased to advise that the Foundation supports the principle of HAMS. Poor corporate governance of Hong Kong listed issuers and related abuse of minority shareholders are major problems in our stock market. The securities regulators are not dealing adequately with these problems, in part because of the inadequacy of the regulatory framework, especially the Companies Ordinance. Abuse of minority shareholders damages Hong Kong’s prospects as a financial centre, and has wider repercussions on fairness in our society.

We have reservations, however, over the design and nature of HAMS. It appears to us that HAMS would be a very substantial institution, of a similar size to the Securities and Futures Commission (SFC). We do not feel that it is a very promising strategy to counter the shortcomings of one bureaucracy by creating another. Moreover HAMS would be funded in a similar manner to the SFC, through a statutory levy. To our mind, this would of necessity imply some accountability to the public, so making HAMS a quasi-public body. Thirdly, an institution the size and scale of HAMS would be needed only because of the inadequacy of the existing regulatory framework. If this framework were modernized – as it needs to be in any event – an institution the size of HAMS would not be needed.

Our preference, therefore, would be to drive for the much-needed reform of the regulatory framework, and to reposition HAMS as a lobbyist/catalyst rather than a full-blooded surrogate regulator. A smaller team of research/policy staff would be sufficient for such work (i.e. perhaps the policy division of HAMS), together with some resources to advise and provide services to members. As for funding, we suggest that Government could provide a one-off grant, rather than on-going funding. After a while, HAMS should be self-supporting from membership subscriptions.

We hope that the above comments are helpful. We appreciate your drawing attention to this important issue. You may, if you wish, add the Foundation to the list of those endorsing HAMS, and publicise this letter.

Yours sincerely

Alan Lung Ka Lun
Chairman