Financial Services Regulation in Asia

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In this section, we cover financial services regulation in some of the Asian countries like China, Hong Kong, Japan, India and Singapore.

3.5.1 China

The China Securities Regulatory Commission (CSRC), the China Banking Regulatory Commission (CBRC), the China Insurance Regulatory Commission (CIRC), and the People's Bank of China (PBOC) are the main bodies responsible for regulating financial services in the PRC.

The CSRC has the ultimate responsibility for regulation in relation to the stock markets in Shanghai and Shenzhen, the futures exchange in Shanghai, and the commodities exchanges in Zhengzhou and Dalian, with the local exchanges retaining certain front-line regulatory functions under CSRC supervision. The CSRC

• Sets regulations governing the markets

• Regulates listed companies, securities, and futures brokers

• Oversees stock and bond issues

• Supervises the establishment and operation of investment funds

• Has jurisdiction over the auditors of publicly listed companies and law firms, which provide advice in relation to the issue, listing, or trade of securities

• Appoints the head of each exchange

• Approves the directors and senior officers of securities companies

Since 2003, banking regulation has primarily been carried out by the CBRC. It has broad supervisory and disciplinary functions in relation to banking activities in mainland China: amongst other things, it licenses banking institutions, sets their authorized business scope and formulates and enforces regulations governing their operation. In addition to its role in relation to monetary policy, the PBOC (the central bank of China) retains responsibility for the inter-bank lending, bonds, and foreign exchange markets, and is the lead agency for anti-money laundering activities.

The CIRC regulates the mainland Chinese insurance market. In addition to setting regulations, it oversees the establishment and operation of insurance companies and their subsidiaries and monitors the standard of insurance agents and insurance companies' senior management.

3.5.2 Hong Kong

The main bodies responsible for regulating financial services in Hong Kong are the following:

• Securities and Futures Commission ("SFC")

Stock Exchange of Hong Kong Limited ("Stock Exchange")

• Hong Kong Futures Exchange Limited ("Futures Exchange")

• Hong Kong Monetary Authority ("HKMA")

• Office of the Commissioner of Insurance ("OCI")

The SFC is responsible for regulating the securities and futures market. In this regard, the SFC performs a number of supervisory roles and is accorded extensive regulatory powers to enable it to perform its functions. First, the SFC is responsible for issuing licences to all corporations and individuals wishing to engage or engaging in a wide range of activities, namely, dealing in securities and futures contracts, leveraged foreign exchange trading, advising on securities, futures contracts and corporate finance, providing automated trading services, securities margin financing and asset management.

The SFC also oversees the Hong Kong Exchanges and Clearing Limited ("HKEx"), which is the holding company of the Stock Exchange and the Futures Exchange. The Stock Exchange is the front-line regulator of stock exchange participants and companies listed on the Main Board and Growth Enterprise Market ("GEM") of the Stock Exchange. The Futures Exchange is primarily responsible for regulating futures exchange participants. The SFC retains regulatory supervision over the operations of listed companies in a number of ways, including decisions to exempt from prospectus requirements and investigating listed companies for suspected prejudicial or fraudulent transactions or for providing false or misleading information to the public. The SFC is also responsible for the discipline and sanctioning of sponsors and compliance advisers. The SFC also regulates all persons participating in securities and futures trading by investigating and taking action in respect of market misconduct and other breaches of securities and futures law.

The HKMA regulates the banking industry and generally performs the obligations of a central bank. The OCI supervises a self-regulation system governing the insurance industry, with a view to protecting the interests of policy holders. Insurance intermediaries such as agents and brokers are required to be registered with various self-regulatory bodies which ensure their proper conduct. The OCI is responsible for granting authorization to insurers to carry on insurance business and examining their financial statements and returns. Where an individual or a corporation provides services falling within the jurisdiction of two or more regulators, such individual or corporation would be subject to the regulation by each of the regulators concerned. A number of Memoranda of Understanding ("MOUs") have been signed by regulatory bodies setting out each regulator's roles and responsibilities in situations where there is an overlap of jurisdiction.

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