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March 2nd, 2013:

Hong Kong is making its financial markets less transparent

Mar 2nd 2013 | SHANGHAI |From the print edition

“HONG KONG residents shall have freedom of speech, of the press and of publication.” So begins Article 27 of Hong Kong’s Basic Law. Those rights, ever delicate, are under attack. Just as troubling, so too is Hong Kong’s reputation as Asia’s most transparent financial market.

As part of its effort to modernise the city’s corporate rule book, the government proposed last year that full Hong Kong identity-card (HKID) numbers and home addresses no longer be required of directors. The idea attracted little attention at first. But in recent weeks several Chinese corruption scandals have been exposed by newspapers relying on analysis of such data (mainlanders with ill-gotten gains often stash them in Hong Kong). That has led to a row over the trade-off between directors’ privacy and the public good.

Many agree that home addresses need not be divulged: in Britain, for example, directors may provide a business address. But a surprising coalition now argues that the government must not obscure directors’ identity numbers. Since many local names are similar, the HKID serves as the only practical unique identifier available. Hiding several digits, as the government proposes, would make it hard to cross-reference databases to see executives’ cross-holdings or conflicts of interest.

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Lee Cheuk-yan, a trade-union leader and opposition legislator, cites examples of workers, who have been denied back pay by bosses professing bankruptcy, using identity numbers to track down other flourishing businesses owned by those same employers. Danny Lau of the Hong Kong Small and Medium Enterprises Association thinks only tycoons benefit from such secrecy: ordinary business people “benefit from more information because that means more trust”. Steve Vickers, a former senior police investigator, argues the reforms will make life easier for money-launderers and crooks.

Conspiracy theorists have wondered if officials in Beijing, humiliated by exposés of corruption in the New York Times and elsewhere, have been putting the squeeze on Hong Kong’s government. In fact, these reforms were proposed before the recent scandals. Legitimate data-privacy issues arise, too. But the government has thrown away its chance of a fair hearing by attacking David Webb, a respected activist investor and online commentator.

Troubled by the proposed reforms, Mr Webb published the sensitive directors’ data—all collated from public sources—on one convenient web page. Trouble came when the official privacy commissioner launched a “compliance check” on his publication, warning darkly that “misuse of personal data contained in public registers may be a contravention” of the data-privacy law. Mr Webb argues he is protected by Article 27; media outlets have rallied to his cause. But the legal cloud has forced him to take that page off his website.

Mr Lee’s party will meet the government this month to try to halt the reforms, but his block lacks the votes to force a change. Jill Wong of King & Wood Mallesons, a law firm, believes directors should be held to a higher standard than ordinary citizens but reckons the reforms are “likely to go through”. If so, Hong Kong will have scored an own goal.

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PKTK2vZVDUFeb 28th, 23:30

With an incompetent Government hierarchy it is to be expected. The Financial secretary bloopered again this week when he deemed himself middle class on a salary of US$ 567,000 a year, mansion, free car with driver and first class travel paid for. The mayor’s office manager earns over US$ 462,000 a year and yet he failed as the former HK Environment Minister to achieve anything to clean Hong Kong’s air in the previous 5 years and should have been fired and charged with misconduct in public office! Recently senior Government Ministerial nominees have been the subject of scandal and arrest over alleged former misdoings. Hong Kong property market is the cesspit money laundry of the world with Mainlanders buying property with cash to hide ill gotten funds prior to skipping their domiciles. Jewellery is another favorite stash for the corrupt funds – meanwhile HKG traditional businesses are being ejected from premises by greedy landlords and occupied by jewellery shops and Brand name entities seeking the Mainland dosh. Causeway Bay now has the highest rents in the world and there is likewise no Governmental control on residential rentals ; such were abolished after SARS in 2003 and never reinstated. Hiding director names and contacts is a further step down a non return slope to the abyss and further money laundering transgressions.

Polar ResidentFeb 28th, 16:54

Hong Kong was always going to have a problem keeping as clean and transparent as possible after 1997 and it has done a good job more or less to date. But it is hard to continue to do so with pressure from China both political and financial. I hope Hong Kong will continue to be as open and transparent as can be as it is a huge asset as a credible financial center and a example for China. If it slips to lower standards and turns a blind eye Hong Kong will drift into a lesser entity