The Hong Kong Securities and Futures Commission (SFC) announced yesterday that it will raise the current investor compensation limits from HK$150,000 to HK$500,000 per investor in cases relating to the trading of securities or futures contracts that are listed or traded on the SEHK or the HKFE exchanges.

The regulator plans to raise the compensation limit from HK$150,000 to HK$500,000 for each investor and to raise the trigger levels for suspending and reinstating the investor compensation fund (ICF) levies from $1.4 billion and $1 billion, to $3 billion and $2 billion respectively.

The regulator is also proposing that it should have the authority to make interim compensation payouts from the ICF in situations that may pose a risk to the financial stability of Hong Kong or systematic risks for the securities and futures industries.

One may think that these measures are being put in place to protect investors from adverse market movements, but these measures are actually designed to ensure that any major future market shifts do to freeze or otherwise cripple the local Hong Kong markets. With the civil unrest that has been continuing in Hong Kong, these measures come as no surprise. One question that remains unanswered is how the ICF will be funded in order to raise the trigger levels mentioned above.