Hong Kong Securities Regulator Says It Won't Interfere With Listed Companies

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

15 May 2002

In an open letter released on Monday, Chairman of the Securities and Futures Commission in Hong Kong, Andrew Shen, essentially told smaller investors to 'like it or lump it', following a spate of complaints that the securities watchdog has failed to intervene in the transactions of listed companies.

The SFC head explained that the regulatory body will not interfere with the commercial decisions of companies listed on the SAR stock exchange, unless the law has been broken or guidelines have not been followed, even if minority shareholders feel that their interests have been compromised by a certain transactions, as has happened several times recently.

'Fundamentally, Hong Kong operates a disclosure-based regulatory system...The merit of a transaction is not a matter for the regulators to determine,' he explained, adding that: 'Our primary objective is to ensure that public investors receive reliable information disclosure in order to make the best judgement on transactions or events for themselves.'

He likened the role of a regulatory body to that of a referee, 'ensuring compliance within the game'.

'We realise that shareholders may feel aggrieved if they believe that corporate management is failing them. But if this is purely an issue of competence or a history of bad decision making impacting on value, and the rules have not been violated, the ultimate practical remedy for investors may be to sell,' he concluded.

However, this advice has angered investment experts in the region. Speaking to the South China Morning Post on Tuesday, commentator David Webb, editor of Webb-site.com argued that: 'It is unfair to tell the investors only to sell the shares when they are making a loss on their investment due to the poor corporate governance of the company.'

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