With China always trying to guard against HNW party officials and businessmen moving wealth offshore, regulators in Hong Kong and the mainland have agreed on yet another mechanism to tackle the problem.

The Securities and Futures Commission has reached an agreement with the China Securities Regulatory Commission to introduce a regime that identifies investors who use Mainland-Hong Kong Stock Connect. This service provides for mutual stock market access between Hong Kong and the mainland, enabling investors to trade eligible shares listed on each other’s market through local securities firms or brokers.

The two regulators have agreed to introduce such a regime for southbound trading, but only once a similar regime for northbound trading is up and running. To prepare the market for this northbound exercise by disclosing some operational details, the Stock Exchange of Hong Kong will soon issue an information paper. Implementation is expected by the third quarter of the year.

Mr Ashley Alder, the CEO of the SFC, has welcomed this "reciprocal investor identification regime for Stock Connect" as a useful means of surveillance and monitoring for the authorities in their battle against market misconduct and any sharp practice that might harm investors. The SFC also wants to set up an "investor identification regime" to cover all trading on the Hong Kong Stock Exchange in the longer term. This is in line with similar initiatives in the rest of the world.

The northbound regime will call for the collection and use of personal data by the Hong Kong Stock Exchange and its subsidiaries, as well as its transfer to the mainland exchanges and the CSRC. The southbound regime is to run along similar lines.

Shanghai-Hong Kong Stock Connect began operations in 2014. Shenzhen-Hong Kong Stock Connect began operations in December 2016.