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HKEx Issues Report On Listing Regulation

by Mary Swire,, Hong Kong

08 November 2012

Hong Kong’s Financial Services and the Treasury Bureau (FSTB) has welcomed the report of the Securities and Futures Commission (SFC) on its review of the performance in 2011 of the Stock Exchange of Hong Kong (SEHK) in its regulation of listings.

The annual report reviews operational procedures and decision-making processes adopted by the SEHK's Listing Division, to assess whether they are adequate to enable it to meet its statutory obligation under the Securities & Futures Ordinance to ensure an orderly, informed and fair market.

In its report, the SFC takes the view that those operational procedures and decision-making processes have been appropriate, but it also identifies certain areas for SEHK to continue to enhance its performance.

It is recommended that the SEHK’s Listing Division should adopt a probing approach when dealing with experts' reports, especially those dealing with matters that are new or less familiar to the Hong Kong market, to ensure they are clear and built on a reasonable basis.

In particular, it is suggested that the Listing Division should pay particular attention to whether there is ambiguity or sufficient clarity in the work done and the conclusions reached, and that the bases and assumptions adopted in reaching the conclusions are reasonable. Additionally, there should be sufficient information in respect of experts’ reports disclosed in a prospectus, with new or novel types of reports being brought to the attention of the Listing Committee.

Furthermore, the Listing Division should highlight and discuss in the Listing Division reports all important issues, to provide Listing Committee members with a more nuanced analysis and recommendation, with appropriate weight given to the various issues considered.

The SFC also recommends that the SEHK should consider changing its policy to require the sponsors to attend the Listing Committee hearing to answer questions. In reply, the Exchange has confirmed that it has recently changed its policy in that respect, requiring sponsors to attend Listing Committee hearings.

In addition, the SEHK is advised to continue to work with the SFC and structured product issuers in enhancing the regulation of structured products, and their listing applications. It also recommends that specific internal guidance should be adopted to assist SEHK’s staff to deal with the suspension of trading of structured products. That recommendation has also already been actioned by the Exchange.

In conclusion, the FSTB said that it welcomed measures to ensure high standards in vetting listing applications which will enhance listing standards and protection for investors.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at and a description of the report can be seen at
TAGS: investment | business | law | equity investment | stock exchanges | Hong Kong | standards | regulation | alternative investment

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