Hong Kong's SFC Boosts Powers Over Listed Companies

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

13 June 2002

Perhaps responding to recent calls for supervision of stock market listings to be transferred from HKEx (Hong Kong Exchanges and Clearing), the Securities and Futures Commission yesterday announced that it is upgrading its informal shareholders group to a standing committee with statutory backing. But it has stood behind HKEx as the primary regulator of the market and listed companies.

"Formalising the shareholders group as a statutory standing committee gives the group a more prominent status, signalling to the public our commitment to investor protection and to seeking their views," said Ashley Alder, SFC executive director of corporate finance and Chairman of the committee.

Fellow committee member David Sun Tak-kei, chairman of the Hong Kong Society of Accountants' corporate governance committee, told the South China Morning Post that the SFC wanted to show it was eager to protect small investors: "The high profile move of the SFC to upgrade the status of the shareholders group will not change the function of the group. This is more a symbolic move to allow the public to be more aware of the SFC commitment to listen to the voices of small investors," Mr Sun said.

The role of the SFC became a subject of discussion after former senior director of enforcement Alex Pang wrote a letter, in his personal capacity, to Financial Secretary Antony Leung Kam-chung, criticising HKEx for sloppy supervision of listed companies and suggesting that its regulatory function be transferred to the SFC.

The government however has stood behind HKEx, saying it feels no pressure to change the existing regulatory model: "The SFC is allowed to take action to regulate listed companies in cases where it is not happy with the decisions of the HKEx. This is enough to avoid the HKEx abusing its regulatory role," said an official.

The government believes that rules being formulated under the Securities and Futures Ordinance to require companies to file listing information with the SFC, which will make it a criminal offence for companies to mislead the public, will in effect give statutory backing to HKEx's listing rules.

David Sun Tak-kei, chairman of the governance working committee of the Hong Kong Society of Accountants, supported HKEx continuing to regulate listed companies: "As long as the SFC and HKEx can work together closely, there is no evidence the current regulatory model has any major problem."

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