28 March 2003

Dear Sir / Madam,

Supervisory Policy Manual (SPM)

Module SB-1: Supervision of Regulated Activities of SFC-Registered Authorized Institutions
Module SB-2: Leveraged Foreign Exchange Trading - Conduct of Unsolicited Calls

I am pleased to inform you that the Monetary Authority is issuing the above SPM modules as statutory guidelines under section 7(3) of the Banking Ordinance by notice in the Gazette today.

These modules are prepared in the light of the impending commencement of the new securities and futures supervisory regime, and after consultation with the industry Associations. Module SB-1 sets out the HKMA's approach to the supervision of the regulated activities of authorized institutions (AIs) that are registered, or deemed to be registered, with the Securities and Futures Commission under the Securities and Futures Ordinance.

Module SB-2 prescribes the HKMA's approach to the supervision of AIs' conduct in relation to the making of unsolicited calls in connection with leveraged foreign exchange trading as well as the appraisal of customers in this regard. This module is basically a consolidation of two existing HKMA guidelines, namely:

7.4.1  "Guideline on Leveraged Foreign Exchange Trading Issued under Section 7(3) of the Banking Ordinance (Cap 155)" dated 16 November 1995; and

7.5  "Leveraged Foreign Exchange Trading Conduct for Unsolicited Calls and Appraisal of Customers" dated 22 March 1996.

On-line access to these modules is available under the icon of "Supervisory Policy Manual" in the HKMA's public (http://www.info.gov.hk/hkma) and private (http://www.hkfin.net) web-sites.

Should you have any questions relating to these modules, please contact Mr Samuel Leung at 2878-1541 or Miss Alice Lee at 2878-1603.

Yours faithfully,

Raymond Li
Executive Director (Banking Development)