The proposed independent Financial Reporting Council will benefit the investing public, the accountancy profession and Hong Kong as a whole, Secretary for Financial Services & the Treasury Frederick Ma says, hoping lawmakers will support and pass the bill soon.

In his latest FSTB & You article, Mr Ma reiterated the development of the financial markets is built on investor confidence and support, while investor confidence depends very much on their trust in accounting reports.

"To strengthen Hong Kong's position as an international financial centre, it is high on my agenda to introduce measures to enhance the transparency and accountability of the accountancy profession."

Apart from increasing the number of lay members on the council, investigating and disciplinary committees of the Institute of Certified Public Accountants, another initiative being taken forward is the setting up of an independent Financial Reporting Council, which will be mainly tasked to investigate irregularities committed by auditors of listed corporations.

Proposal receives support

The proposal has received general support from the accountancy profession and the community, as well as the LegCo Financial Affairs Panel. The relevant bill was submitted to Legco in late June this year.

Mr Ma said the proposed council will be able to carry out investigations more effectively, as it will be given more comprehensive statutory investigatory powers and be independent of the accountancy profession.

"The Financial Reporting Centre will possess professional expertise to investigate suspected irregularities of auditors and will, through the provision of assistance to other enforcement agencies, help to strengthen the regulatory teeth. This will enhance protection for investors, as well as increase their confidence in the financial markets, and will upgrade corporate governance and market quality, thereby fortifying the status of Hong Kong as an international financial centre."

Council's function "investigatory"

He said the proposal will interface well with the present regime, adding the function of the Financial Reporting Council will be purely "investigatory".

"We believe that it is more appropriate to have different bodies to assume the 'investigatory', 'prosecution' and 'disciplinary' roles. This will also help avoid any overlap of functions. We consider the proposed arrangements practical and sensible."

The council's funding will be equally shared among the Companies Registry Trading Fund, Securities & Futures Commission, HKEx and Institute of Certified Public Accountants. They will each contribute $2.5 million a year to form a total of $10 million as the council's recurrent funding during the first three years of its operation, and $10 million in total to set up a reserve fund. The Companies Registry Trading Fund will also provide office accommodation for the council.

Mr Ma said the proposed amount of funding will be adequate to meet the council's initial operation and is in line with the principle of maintaining a lean structure. The funding requirements in the longer term will be reviewed later.