商学院故事

25.01.2019

Helping Secure Hong Kong’s Future at SFC

“Our rules are meant to be principles-based and technologically neutral. The challenge is how to apply consistent principles of investor protection and provide useful, detailed guidance on the use of innovative technology in this new, fast-moving environment.”
Tim LUI, Chairman of the Securities and Futures Commission

Tim LUI recently took over as Chairman of Hong Kong’s Securities and Futures Commission (SFC). At a time of great technological transformation in the securities industry, Lui says he will strive to ensure that the SFC continues to protect the integrity of the city’s financial markets, while maintaining their international competitiveness.

“The SFC needs to be open to the benefits of innovation but must also stay vigilant about potential risks,” Lui says. Striking the right balance is an ongoing challenge. For example, while Artificial Intelligence (AI) and machine learning can help customize investment products to deliver a better customer experience, they may raise concerns about security and management accountability. “Robo-advisors could be useful, but providers will still need to ensure that the customer protections provided by the traditional financial intermediaries we regulate [are in place],” Lui adds.

Changing tools, unchanged functions

Though technology has the potential to expand the breadth and depth of the financial services industry – for example, where machines can fulfill some client-facing and advisory roles­ ­– Lui believes that the nature of the industry will remain fundamentally unchanged.

“While we appreciate the better and more efficient user experience resulting from technological development, the industry’s core functions such as fundraising for corporations, financial intermediation, and the provision of investment opportunities remain the same.” 

Again, when it comes to the question of whether more specific developments should be regulated – such as the increasing number of securities and investment services that are being automated ­­– Lui adopts a measured perspective.

“Our rules are meant to be principles-based and technologically neutral. The challenge is how to apply consistent principles of investor protection and provide useful, detailed guidance on the use of innovative technology in this new, fast-moving environment,” he says.

While noting more firms are experimenting with AI in the securities and investment services they offer, he points out that automation itself is not new and has already been applied in other areas such as trading.

“From our experience, we saw that the core values in technology-based processes did not really change. The principles, such as protecting client interests and best execution, are the same, and we regulate securities and investment services, with or without AI systems, in the same way.”

If, say, a firm contracts a vendor to provide services that involve the use of technology, the SFC will hold the firm responsible, he says. Businesses need to ensure that systems are properly designed and are used in a way which complies with the regulatory requirements. This includes establishing proper governance structures and conducting sufficient testing.  

Hong Kong’s status

As well as discharging its supervisory responsibilities, the SFC also supports policies designed to sustain Hong Kong’s status as a global financial hub.

“Hong Kong is unique among international financial centers as it is the only one that can connect investors in mainland China and the rest of the world,” Lui notes. “We also have a robust legal and regulatory framework and high-caliber professionals in the legal and accounting fields.”

He adds that, in recent years, Hong Kong’s universities have built strong reputations as centers of excellence in science and technology, and are attracting high-quality researchers from around the world. This combination of financial, professional and technological expertise gives the city a clear edge, he believes.

“In addition, financial regulators, including the SFC, have been actively steering reforms explicitly aimed at promoting the use of new financial technologies that give investors more choice, convenience and flexibility.”

Educating future talent

Hong Kong’s higher education system is the cradle of talent for the securities and futures industry, Lui says: “I am confident that our future professionals will have the ability to comprehend the unique situation facing the financial industry, and to appreciate which, and in what ways, new technologies can be applied to support the development of the industry.”

Those joining the sector should be capable of quickly analyzing large quantities of information and translating it into concise and meaningful ideas, he suggests. They should also be proactive in applying this information to differing aspects of their business and be mindful of any added value they can provide to their clients.

“There will likely be more demand for candidates with backgrounds in information technology and data science, but the core competencies of financial professionals will continue to be strong analytical abilities accompanied by high standards in terms of ethics and conduct.”