The Hong Kong Securities and Futures Commission (SFC) missed its deadline to appoint a new chief executive before its current leader, Martin Wheatley, moves on to a regulatory post in his native United Kingdom. SFC deputy chief Alexa Lam has been named interim CEO, and there has been no word from the agency on how long the search is expected to continue.
This is a particularly distressing moment for the SFC to be without clear leadership. Before relinquishing his office, Wheatley drew attention to two critical issues which will need to be confronted in the coming months. First was a challenge issued to United States Treasury Secretary Tim Geithner. Last week, Geithner publicly expressed fears that efforts at reform would backfire and ignite a regulatory “race to the bottom.” Wheatley, sensitive to veiled criticism of his institution, fired back: “We’ve been fairly clear with the US, and to use a phrase I’ve grown up with, ‘People in glass houses should not throw stones’…The US regulatory system has shown itself to be not best able to withstand the sorts of traumas we have been through over the past three years, whereas the Hong Kong system in many respects has.” He called upon his successor to move forward in OTC derivative regulation, with an eye to merging and streamlining new Asian trading and clearing platforms.
He also turned his bully pulpit to the Chinese stock bubble. In an interview with the Wall Street Journal, he compared the current craze for all Chinese IPOs to the 90s dot-com goldrush: “Everybody wants a piece of China…therefore, there has been a rush to [invest in] Chinese companies.” Investors, blinded by the glory of Chinese potential, have begun snapping up new stocks after little or no company research. Though he believes yuan-based trading has a bright future, Wheatley cautioned that “I’m thinking in three to five years is when we really see that market develop.”
The troubling period begins now. With no clear leader with a strong vision, the may SFC will have difficulty wrangling the headstrong market in its jurisdiction. Hopefully, the government of Hong Kong will not drag out the search much longer.