Hong Kong's financial services industry paid a respectful tribute to the former deputy CEO of the city's Securities and Futures Commission, Alexa Lam, who retired from office last week.
Lam received praised for improving cooperation between the SFC and its mainland counterpart, the China Securities Regulatory Commission, and instilling greater transparency between the SFC and regulators more generally.
Above all she was singled out for her work on the pending Hong Kong-China mutual recognition scheme and for paving the way for the Stock Connect trading link with Shanghai. These landmark initiatives are regarded as her legacy.
However, there was also criticism about tighter funds rules introduced under her tenure as well as a failure to shorten time-to-market for managers launching funds.
Having worked at the SFC since 1999, and been an executive director since 2001, Lam finally left with one of her key initiatives, cross-border mutual fund recognition, on the verge of fruition.
Last week Lam told local media that about 100 of the 300 funds domiciled in Hong Kong would be qualified to trade across the border when the scheme was launched. Similarly, 500 mainland-domiciled funds would be allowed to be sold in Hong Kong. This matches the criteria that was tentatively set out when Lam first announced mutual recognition in 2013.
Stewart Aldcroft, senior adviser at Citi Securities & Fund Services in Hong Kong, noted that funds less than 12 to 24 months old would be excluded from the scheme. Other products such as exchange-traded funds, fund-of-funds, feeder funds and those with less $50 million in AUM would not be sold cross-border.
Figures in the city's asset management industry were largely appreciative of Lam's endeavours, which may provide her with some comfort as she recovers from a broken ankle sustained on holiday in Angkor Wat two weeks ago. "I will be grounded for a month," Lam told AsianInvestor.
Rebecca Lentchner, head of policy and regulatory affairs at the Asia Securities Industry & Financial Markets Association (Asifma), highlighted Lam's role in the internationalisation of the renminbi and the positioning of Hong Kong as a global RMB hub for the currency as well as mutual recognition.
“Ms Lam has been a critical stakeholder of Asifma since our inception in 2005. She has shown tremendous leadership on many important areas of capital market development,” Lentchner said. “Her hard work, dedication and pragmatic approach to the effective regulation of the Hong Kong market will be her lasting legacy."
Extending the tribute was Hong Kong-based Philip Tye, chairman of the Alternative Investment Management Association (Aima). "We extend our very best wishes to her for her retirement; and our gratitude for her many industry accomplishments, but specifically her commitment to HK-mainland connectivity."
Similarly, Alwyn Li, Hong Kong-based partner at Deacons, praised Lam's Hong Kong-China work, recognising her efforts in paving the way for Stock Connect and pushing forward mutual recognition.
“She has made a very big far-reaching impact on the industry because she has been at the SFC for a long time,” said Li.
Yet another lawyer privately noted that creeping signs of overregulation that occurred during her watch was beginning to hurt the industry.
“Before the financial crisis we did see a lot of innovative and creative products,” said the lawyer, who declined to be named. “Some of them were quite complex. But because of the financial crisis and the Lehman Brothers collapse, I guess the SFC became very careful and cautious about investor protection, which meant it began clamping down on creativity and new features for funds.”
As evidence of over-regulation he cited the limited number of SFC-registered hedge funds, structured funds and non-Ucits funds that invest heavily in derivatives (14 overall, according to the SFC website). The latest “exotic” fund was launched in 2011 with most other funds being authorised between the early 2000s and 2008.
“Rightly or wrongly, the fallout of the global financial crisis is that you have to do more client due diligence and know-your-client procedures," the lawyer said. "But this has come at a cost of lowering the variety of products. They are all pretty much plain-vanilla funds now.”
Lam, who takes up a role as professor at the University of Hong Kong, will be succeeded by the political and financial regulatory figure Julia Leung, effective from March 2, as reported.
Leung was most recently the Hong Kong government's under-secretary of financial services and the treasury until she stepped down in 2013. "She [Leung] has a very good regulatory background and will be a very good hire for the SFC," stated another Hong Kong-based lawyer.