Hong Kong Row Over Regulation Of Listing Process

by Mary Swire, Tax-News.com, Hong Kong

05 July 2002

A lively controversy is under way in Hong Kong over just who should have the responsibility for overseeing the listing process for companies coming to the stock market. When the massive new Securities and Futures Ordinance finally made it to the statute book earlier this year it seemed that there would be a major enhancement of the SFC's role, although with many sets of subsidiary regulations yet to be published the full extent of the SFC's powers is as yet unclear.

Democratic Party financial affairs spokesman Sin Chung-kai for one, believes that the government should be radical and move the role of regulator of listed companies on to the Securities and Futures Commission. "The HKEx is a listed company and it should not regulate other listed companies. There are huge conflicts of interests," he said.

Although HKEx currently runs a largely independent listings committee, it has been planning to implement a new regulatory structure - proposed in a 1999 government blueprint - under which the committee would have ceased operating by October and its functions moved to an internal division of HKEx. But this plan has excited much adverse comment, and earlier this week newly appointed Secretary for Financial Services and the Treasury, Frederick Ma Si-hang, said the independent committee should be retained, as a check and balance on the exchange.

Now the Democratic Party says the government should consider more radical options in deciding how to better regulate listed companies: "Maintaining the status quo is not the right way forwards. The government should revamp the listing structure to allow the SFC to be the company regulator," said Sin Chung-kai.

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