December 2006 Newsletter Comment

Here is the comment from our December 2006 newsletter. If you would like to subscribe please visit our website at complianceasia.com

Comment

Welcome to our first newsletter in 2007 with a summary of Asia Pacific regulatory issues in December 2006.

An interesting breaking story over the Christmas holidays in Australia involved the resignation of the Chairman and senior executives of Alinta Gas following an offer to purchase the company by those individuals. We are expecting to see more about conflicts of interest, directors duties and stewardship issues in 2007 in Australia and this case highlights that some high profile firms still have a long way to go to meet international best practice.

In Hong Kong the Stephane Hug case involving alleged offences on the Tokyo Stock Exchange was an interesting interpretation of the Hong Kong fit and proper rules. Compliance personnel in Hong Kong should read the information available on this case if they are not familiar with it.

The Hong Kong SFC reported that there were 73 companies in 2006 applying for asset management licenses. We believe that this is close to a 25% increase in the number of licensed asset management firms in Hong Kong, if all end up with a license.

In a speech just recently given Ms Alexa Lam from the Hong Kong SFC has highlighted side letters, valuations and sub standard offering documents as issues that the SFC is most concerned about in relation to hedge funds in Hong Kong. We note that these are all fund issues and, in a number of earlier statements made by the SFC at industry functions, they downplayed their role regulating funds versus regulating advisors and managers to funds.

During 2006 we had already noted that a large number of questions directed to asset managers by the SFC were in fact fund issues and this recent speech may be a confirmation that fund issues, rather than issues concerning the Hong Kong regulated entity are an increasing focus of the regulator in Hong Kong. The full text of Ms Lam’s speech can be found on our blog (http://complianceasia.blogspot.com ) and on the SFC website.

In India, SEBI announced that the next IOSCO conference will be held in India in April 2007.

In Thailand, December was of course the month that Thai investments went though a volatile period with on again, off again statements regarding exchange controls. The outlook for 2007 remains uncertain in Thailand with lingering political issues and only marginal improvements in the financial system and legal infrastructure that melted down in 1997.