Transparency urged in securities trading commissions and charges to enhance competition and consumer interests
Consumers are subject to a baffling array of fees and charges, in addition to commissions, in the use of securities trading services, a Consumer Council survey on the securities industry revealed today (February 17).
It was found that charges totalling over 70 items could be applicable, covering trade-related fees to account maintenance, transfer and deposit/withdrawal of securities to registration and scrip fees, etc.
Small investors in particular are most likely to be confused and unable to understand the circumstances, and justifications, under which charges are imposed.
Variations in terminology adopted by individual banks or brokerage firms for such charges only add to the difficulty of consumers to conduct meaningful price comparison and negotiation.
The survey was conducted on a random sample of 30 retail-oriented securities trading service providers - 20 brokerages and 10 banks - to compare the costs to consumers in using securities trading services.
Considerable variances were found in the industry in both the level of commissions and fees, and range of services.
Trading commissions, according to the survey, varied over a wide range from 0.1% to 0.5% of the transaction amount.
Such factors as transaction channels (electronic channel vs traditional channel), the transaction amount and frequency, client relationship all played a part in the determination of trading commission to consumers.
This clearly indicates that the minimum trading commission rule of 0.25%, due to be abolished in April, could be negotiable and subject to bargaining or circumvented through related Non-Exchange Participants (usually online operations), who are not bound by the minimum commission rule.
Generally speaking, on average, on-line transactions were more economical, and brokerages charged less than banks.
Using a typical retail investor (based on the total cost for one buy-and-sell transaction of 1 board lot of shares valued at $30,000 within half a year) as illustration, the survey drew the following findings on costs:
- On-line transactions are 16%, on average, lower than traditional transactions.
- Banks (due to deposit fee and custody fee for such services) are 55% to 67%, on average, higher than brokerage firms.
Naturally the higher the frequency of transaction, the smaller the difference will be between banks and brokerages - on more active (i.e. 10) transactions the gap will more likely to be 21% to 24%.
Consumers, however, should be wary of the different practices adopted by banks and brokerage firms in charging their clients for services.
For instance, while some banks may impose deposit fee, they often also waive such fees as settlement fee, scrip fee, as well as fees for collection of cash dividends, bonus shares and rights issues.
Brokerage firms, which waive custody fee, may however charge dormant account fee on inactive retail investors.
As part of its statutory function to protect and promote the interests of consumers, the Consumer Council is calling on securities trading providers for greater transparency in the fees and charges of securities trading services.
Standardized terminology should be adopted for all service charges to avoid confusion to consumers and to facilitate price comparison by consumers.
Consumers and small investors in particular are encouraged to shop around for the bank or brokerage firm which is trustworthy and reliable in meeting their own individual needs and requirements.
They should not focus on just the trading commission, but also compare the overall costs involved and consider what are the services they want. Ask for detailed breakdown of all cost items and seek clarification of any unclear charges.
Caution on potential hazards of toys with small balls/parts and projectiles
Parents of young children are warned to be vigilant of potential choking and puncture hazards posed by some toys in the market.
The warning followed a Consumer Council test which focused on toys containing small parts (such as balls, marbles, accessory parts, etc.) and projectiles capable of being discharged at high speed and force.
Out of a total of 50 samples, 9 samples were found to fail to comply with the safety requirements in both of the standards (EN 71-1:1988 and ASTM F963:96a). Of these 9 samples, 8 failed in safety labelling requirements, 3 in sharp or small parts and 4 in projectiles.
In addition, 14 samples passed the EN 71-1:1988 standard but failed the ASTM F963:96a standard in relation to small balls or batteries requirements.
In the US, at least 17 children, aged from 3 months to 8 years, suffocated due to choking by toys during the period 1999-2001, according to statistics of the US Consumer Product Safety Commission.
Toys involved in these choking or asphyxiation deaths included small balls, marbles, toy building blocks and projectiles.
In Hong Kong, similar statistics are not readily available but there have been occasional reports of young children accidentally ingesting small objects (toys or otherwise) and requiring hospitalization.
The samples in the test were sourced from different types of stores - toy shops, department stores, personal product chains - within the price range of $9.9 to $179.
The test revealed that some of the toys sample pose potential choking and puncture hazards and do not comply one or both standards in safety. Highlights of the test include:
As many as 18 samples were found to contain "small balls" without the required warning label. "Small balls" are determined if they cannot pass through a hole of a diameter of 44.5 mm (1.75 in) of a test template.
Toys with small balls are considered not suitable for children under 36 months of age. Any small ball or toy or game that contains small balls intended for children 3 years of age and older are required to bear the small ball warning label.
Out of the 15 samples of projectile toys, 4 were found with discharging mechanism of toy projectiles which could be used without any modification to discharge potentially hazardous improvised projectiles.
2 of the projectile samples with resilient impact surfaces exceeded the limit of 0.5 Joule in kinetic energy as specified in the standard. In fact, toy projectiles once reaching a kinetic energy of greater than 0.08 Joule, are required to bear a warning against discharging the projectiles at point-blank.
1 toy projectile sample was detected to have sharp point posing a potential puncture hazard. In another 7 samples, sharp points or small parts were exposed after the toys were put through a series of tests to simulate potential abusive treatment of toys with violent force by children.
9 samples were not in conformity with the Bilingual Safety Labelling Requirement in that the required warning bore no Chinese. 1 sample was found without the local address of the toy trader in violation of the Identification Marking Requirement.
The Consumer Council has notified the Customs and Excise Department of the test findings for possible further action under the Toys and Children's Products Safety Ordinance.
Council test shows "high-fibre" claims of breads and biscuits questionable
If high-fibre bread and biscuit are your favourite choice, you may be in for a surprise.
The Consumer Council has conducted a test to specifically verify the nutrient claims in respect of the fibre contents of these foodstuffs. Included in the test are 20 samples - 9 breads and 11 biscuits.
The results are quite a revelation to consumers. Among the samples, 6 made claims suggesting high or rich in fibre contents.
According to the US requirement, no food product (of a 2000-calorie diet) could rightly make a high-fibre claim, unless it contains not less than 5 grams of fibre per serving (i.e. equivalent to 30 g of biscuit and 50 g of bread).
But, according to the test, in the case of the biscuit samples, the fibre contents ranged from 0.8 to 2.0 g per serving. And, in the case of bread, from 1.9 to 3.9 g per serving.
The results are noticeably short of the US requirement and the 6 samples' high-fibre claims are therefore questionable.
In fact, the test revealed that, among the biscuits, the sample with the lowest fibre contents (measured at 0.8 g per serving) ironically bears a "high-fibre" claim on the package but the sample with the highest fibre (2.0 g per serving) bears no such claim.
Further, the same sample with the least fibre was priced at $2.6 per serving compared with only $1.4 per serving for the sample with the mostfibre.
The findings on the bread samples are quite similar. Again the sample with the second lowest fibre contents (2.2 g per serving) bears a "high-fibre" claim while the sample with the highest fibre contents (3.9 g per serving) makes no such claim.
In the light of the findings, suppliers are urged to seize the initiative to provide consumers with clear and precise nutrition information on their products as many consumers need to rely on them for various health reasons.
As there is in Hong Kong no legislative requirement to include nutrient contents on food labels, the Government is also urged to consider setting up more comprehensive nutrition labelling requirements and local standard of 'high' and 'low' nutrient claims to safeguard the interests of consumers.
The Consumer Council has forwarded the test findings to the Food and Environmental Hygiene Department for whatever follow-up action deemed necessary.
Be wary of copyright licence fee for music-on-hold
Is your telephone system equipped with a music-on-hold function?
If so, do you realise that the music-on-hold may have copyright and that you may be subject to what is called a public performance annual licence fee?
The Consumer Council has raised concerns over the conduct of some copyright licensing bodies in the demand and collection of fees including those related to music-on-hold.
To safeguard consumer interests, the Council has issued a checklist to assist the public:
- Check whether your music-on-hold has any copyright.
- Check also with your telephone system supplier who may have already made alternative arrangement to pay for the copyright.
- Check the membership list of Phonographic Performance (South East Asia) Ltd. (PPSEAL) to see if the body has the right to collect the licence fee from you.
- Check also whether you or your organization is under exemption (i.e. charitable or non-profit-making concerns).
- Check the website of PPSEAL on the annual licence fee payable.
- Alternatively, ask you telephone system supplier to delete the music-on-hold function.
And use other music verified to be without copyright.
The Consumer Council has recommended that in the long run all copyright licensing bodies should be required to be registered, and that the functions of the Copyright Tribunal should be extended, with the necessary power and resources, to ensure market competition.
Further, under the proposed mandatory registration scheme, a code of practice should be introduced to govern, amongst other things, the manner in which licensing bodies represent their rights in the collection of fees.
Other highlights in this February issue of CHOICE
Digital Cameras
23 models ranging in output resolution from 2 to 5 million pixels (suitable for general to professional users) were tested comparing them for their picture quality, movie quality, viewfinder accuracy, flash and battery performance, versatility and ease of use. Major findings indicated: all samples produce at least satisfactory overall picture quality but not all samples have good flash performance; versatility and ease of use differ significantly; and the major weakness is shutter delay resulting in low score for some samples.
Steam Irons and Steam Brushes
The test compared a total of 17 models (11 corded steam irons, 2 cordless steam irons, 2 corded/cordless steam irons and 2 steam brushes) for their performance, ease of use and safety. Major findings indicated: models now have higher wattage (1000 W - 2000 W) available than before when last tested in 1985 (1000 W - 1200 W); huge discrepancies of steam output, from 7 g/min to 31 g/min at maximum temperature setting; all but one samples had water dripping problem when the iron is not hot enough to generate steam at lower temperature setting but not with models equipped with anti-drip function. Ironing by cordless models is more time-consuming as the irons need to be pre-heated both before and during. In addition, 7 of the steam iron samples were found not in full compliance of the IEC 60335-2-3 safety standard. There is no immediate hazard if used carefully, but manufacturers are urged to improve the design accordingly.
Chairing the press conference today (February 17) on the publication of CHOICE issue number 316 is Dr. Matthew NG, Chairman of Publicity and Community Relations Committee of the Consumer Council.