Hong Kong should review its investor protection mechanism to facilitate the launch of a third board in the stock market, rather than shy away from new initiatives, said Laura Cha Shih May-lung, chairperson of the Financial Services Development Council (FSDC).
The key to the proposal, which was outlined by Hong Kong Exchanges and Clearing Ltd. (HKEx, 00388.HK) in its 2016-2018 plan, is how and to what extent we should enhance protection for investors, Cha said Monday, according to the Hong Kong Economic Journal.
HKEx has proposed the launch of a third board to help startup companies, but there have been concerns that low thresholds could attract weak firms and put investors at risk.
It is impossible for regulators to prevent all wrongdoings from ever taking place, Cha said, adding that raising the investment threshold is not the solution.
What the regulators should do instead is to establish clear regulations and be consistent in enforcement as a way to protect investors, she added.
The government could consider introducing a “grandfather clause” into existing rules to enhance supervision over financial technology development while at the same offering enough flexibility for players, according to Cha.
As an open economy, Hong Kong should also look outward for opportunities, especially when the domestic economy is close to saturation level, said Cha.
China’s “one belt, one road” plan will be a good cornerstone for further development of Hong Kong’s economy, the FSDC chief added.
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