A restructured listing framework was announced Wednesday by the Hong Kong government to enhance competitiveness of the financial market of the Hong Kong Special Administrative Region (SAR).
According to Frederick Ma, secretary for financial services and the treasury of the Hong Kong SAR government, the listing package covers a three-pronged program of an integrated Listing Committee, streamlined listing process and strengthened disclosure requirement.
Under the new regulatory framework for listing, the Main Board and GEM (Growth Enterprise Market) Listing Committees will be combined into a new Listing Committee to decide on new listing applications and the cancellation of listings for both the Main Board and GEM.
The new Listing Committee consists of 24-30 independent members, with broad representation from issuers, financial intermediaries and the investing public. The chief executive of Hong Kong Exchanges and Clearing Limited (HKEx) will be an ex-official member.
The new Listing Committee will start operation from January 1, 2003.
Moreover, the streamlined listing process will shorten approval time and help reduce the overall listing cost. The strengthened disclosure requirement will ensure the quality of information under streamlined regime.
"The restructured listing framework will provide effective checks and balances, alleviate concerns of conflict of interests, and be conducive to market development. We are confident that the new measures will improve the quality of listed companies and further enhance the quality and competitiveness of the market and strengthen Hong Kong's position as a premier capital formation center in the region," Ma said.
The new listing package was announced after a consensus was reached among the Hong Kong SAR government, the Securities and Futures Commission (SFC) and HKEx.
On May 6, 2002, HKEx issued a report giving an overview of the proposed structures for handling disciplinary-related and non-disciplinary-related listing matters as well as the rationale for the initial proposed structures.
The initial proposed structures aimed to create an administratively simpler, effective and efficient framework while providing the necessary checks and balances especially in relation to potential or real conflicts of interests.
The initial proposed structures followed the blue print of the business and regulatory framework envisaged in a document entitled “Hong Kong Exchanges and Clearing Limited: Reinforcing Hong Kong's Position as a Global Financial Center" issued by the Financial Service Bureau in July 1999, soon after the financial secretary announced plans to merge the exchanges and clearing houses into HKEx.
Since the May report was published, HKEx received public comments on the initial proposed structures, including the potential conflicts of interest and the lack of market participation in the listing process.
HKEx considered these concerns carefully and proposed some modifications to the proposed listing structures aimed at addressing these concerns.
According to the new listing package, decisions of the Listing Committee are subject to appeal to a Listing Policy and Appeals Committee on specified grounds. A Disciplinary Appeals Committee will also be formed to hear appeals against disciplinary decisions.
Both appeals committees will consist of two non-executive directors of HKEx and 10-13 independent members with broad representation from issuers, financial intermediaries, the investing public and two non-executive directors of HKEx.
On the disclosure requirement, the guiding principle is that it is the responsibility of the listing applicants and their professional advisers to ensure full and proper disclosure of all material aspects of the listing applicant and its business and the associated risks.
The clarification of the division of responsibilities between the HKEx Listing Division and the listing applicants and their sponsors regarding quality of the prospectus will contribute to the healthy development of the securities market in Hong Kong, said Charles Lee, chairman of HKEx.
Lee said HKEx fully supports the package of new listing structure and streamlined listing process and in particular, HKEx welcomes the consensus reached among the government, SFC and HKEx that the Stock Exchange of Hong Kong will continue to serve as the front-line regulator of listed companies.
"We believe the system has worked well. The Stock Exchange is close to the market, and is thus able to adjust its rules and procedures quickly to the latest market development," he added.
(Xinhua News Agency July 25, 2002)
