China Pushed for Reappointment of Hong Kong’s SFC Chief

(Bloomberg) -- Hong Kong’s surprise decision last month to reappoint its top securities regulator came after a suggestion from Beijing that he remain in the role, according to people familiar with the matter.

China’s government proposed that Ashley Alder stay on as head of Hong Kong’s Securities & Futures Commission in part because he’s viewed by foreign investors as a steady hand at a time of heightened economic and political turbulence, the people said, without elaborating on how the message was communicated to Hong Kong. Alder, a Brit who first took the job in 2011, had been planning to step down in September. He’ll now stay on for another three years.

While it’s not unusual for China’s government to give input on key Hong Kong personnel decisions, the Alder case is notable because Beijing appears to have originated the idea for his last-minute reappointment. That could add to concerns about increased Chinese meddling in Hong Kong affairs, even though Alder is considered by many market participants to be an independent and effective regulator.

His reappointment was announced just days before China unveiled plans to impose controversial national security legislation on Hong Kong. The move roiled local markets and has been criticized for undermining the city’s judicial independence, a feature that underpins its status as a hub for international companies and investors.

Hong Kong officials have in recent days been touting the benefits of greater financial integration with China, with Chief Executive Carrie Lam saying on Tuesday that the city should be “promoting greater connectivity” between the two markets. Financial Secretary Paul Chan said in a Bloomberg Television interview on June 5 that Hong Kong is ready to defend its currency’s link to the U.S. dollar with support from the mainland.

In a statement last month on the Alder decision, Hong Kong’s government cited the need for “continuity of leadership” at a time when the coronavirus pandemic is driving up financial-market volatility. The statement didn’t say whether China played a role in the reappointment.

In an email on Friday, it said, “the government was grateful to Mr. Alder’s acceptance of invitation to continue to lead the work of the SFC for another term amidst the exceptional circumstances.”

Still, under the Securities and Futures Ordinance, consultation with the central Chinese government on the appointment isn’t necessary, according to the statement.

An SFC spokesman declined to comment. China’s Hong Kong and Macau Affairs Office didn’t immediately respond to requests for comment. Lam was elected in 2017 by a committee dominated by Beijing loyalists.

Inside the SFC, Alder’s reappointment surprised rank-and-file employees and senior officials because the commission had already started a formal search for its next CEO, people familiar with the matter said. Some staffers and investors had expected him to be succeeded by his longtime deputy, Julia Leung.

Even though Alder’s reappointment was unexpected, it makes sense for him to stay, according to Tom Kirchmaier, a visiting senior fellow at the London School of Economics.

“China needs Hong Kong to remain the gateway to international financial markets, and undoubtedly the events of the last weeks didn’t help to calm nerves on the international stage,” he said. “To reappoint a known and tested hand makes a lot of sense in this respect to send a signal.”

Since taking office, Alder has overseen the introduction of dual-class share listings in Hong Kong and worked to root out fraud and market manipulation. ​The SFC has also gone after misbehavior by banks, fining HSBC Holdings Plc a record HK$400 million ($52 million) in 2017 over sales of structured products that imploded after the collapse of Lehman Brothers Holdings Inc.

Read more: UBS Said Fined About $48 Million Over Work on Hong Kong IPOs

This week Alder was re-elected as chairman of the International Organization of Securities Commissions, a group of regulators from more than 115 jurisdictions around the world.

He’s committing to another term during one of the most turbulent periods for Hong Kong since its handover from Britain in 1997. Doubts about the city’s role as an international financial hub are rising, while political tensions are likely to stay elevated in the run-up to local legislative polls in September and the U.S. presidential election in November.

Speaking at a Bloomberg Policy Briefing Series on Thursday, Alder said his key focus will be to keep Hong Kong functioning “in a manner that’s completely familiar to western investors.”

©2020 Bloomberg L.P.