Hong Kong: an executive exodus at the securities regulator

The departure of top executives at the Securities and Futures Commission takes a headcount headache to a new level, writes ACGA Head of Research Jane Moir.

Ashley Alder is to step down as CEO of the Securities and Futures Commission, leaving half of the six top executive slots vacant at Hong Kong’s securities regulator. Two other key positions—the heads of enforcement and corporate finance—have also departed in the past 10 months and their posts have yet to be filled.

Alder will cut his contract short by nine months to become chair of the United Kingdom’s Financial Conduct Authority in January 2023. His departure follows that of Executive Director of Enforcement Thomas Atkinson in May 2022 and Executive Director of Corporate Finance Brian Ho in August 2021. Both positions remain vacant, and after Alder departs there will be just three remaining serving executive directors: those responsible for supervision of investment products, intermediaries, and supervision of markets.

Staff in the lower ranks are also heading for the door. The SFC lost 12% of its employees in 2021, including 25% of its junior professionals. Its work is being impacted. The regulator gave a blunt warning earlier this year in a briefing to lawmakers: “Without the appropriate number and mix of staff, the commission will not be able to deliver on the various initiatives underpinning Hong Kong’s development as an IFC.’’

Alder himself cut a frank tone at the same briefing: “Does the higher levels of staff turnover affect our work?’’ he said. “The straightforward answer is yes.’’

Pandemics and politics

Attracting and retaining talent is a prickly issue for Hong Kong as strict pandemic measures and political developments curtail a city once revered for its freewheeling spirit and hyper connectivity to the world—and China in particular.

Brain drain tops most business groups’ agenda as employees shirk the city’s strict quarantine rules for markets such as Singapore or take advantage of emigration opportunities to settle in Britain and elsewhere.

Hong Kong’s population shrank at a record pace in 2021. As an indication of the high interest in such developments, the city’s outspoken activist investor David Webb, editor of Webb-site.com, now keeps a tally of daily passenger traffic crossing the city’s border points.

A reality check on resources

The SFC is one of the region’s best-funded securities regulator and in our 2020 CG Watch ranking the commission took joint first place for its sufficiency of resources to carry out its regulatory objectives. We include human capital in this metric.

A vacuum at the top is an obvious concern and the fact that Atkinson and Ho departed without successors in place suggests the process of finding replacements is proving to be either extremely slow or excessively challenging. It does not bode well for the recruitment of a new CEO.

It also comes as Hong Kong increasingly puts the welcome mat down for companies with weighted voting rights, SPACs, secondary listings, and firms with VIE (variable interest entity) structures. The challenges of regulating firms with a primary base in China are already formidable given cross-border limitations.

An understaffed regulator will struggle with such a mandate, and it needs top calibre lieutenants to set strategy, make hard decisions and execute operations. The SFC is not alone in its struggle to find best and brightest. Unfortunately, like much of Hong Kong, it is in a funk not of its own making.

For further information, please contact jane@acga-asia.org