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HKEx's Insider Rules To Become Effective

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

04 December 2012


The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has published the conclusions of its consultation on rule changes to complement the introduction of the statutory obligation to disclose inside information.

On August 3, 2012, the Exchange published a consultation paper to seek comments on the proposed rule changes consequential on the implementation of the statutory disclosure regime for listed companies by the Securities and Futures (Amendment) Ordinance 2012 coming into effect on January 1, 2013. The consultation period ended on October 3, 2012.

Under the SFO’s new inside information disclosure regime, listed corporations will be required to effect disclosure in a timely manner, backed by civil sanctions for non-disclosure. It is intended to help promote a continuous disclosure culture among listed corporations to enhance market transparency, and to bring the regulatory regime for listed corporations more in line with other international financial centres.

Under the new legislation, a listed corporation will be required to disclose price-sensitive information as soon as reasonably practicable after it has become aware of the data. An officer of the corporation will also be in breach if the corporation’s transgression is a result of his intentional, reckless or negligent conduct, or if he has not taken all reasonable measures to ensure that proper safeguards exist to prevent the breach.

However, the Stock Exchange still has a statutory obligation to maintain an orderly, informed and fair market for the trading of securities listed on it under the SFO; and, in connection with the implementation of the statutory disclosure regime, changes to the Listing Rules will be necessary to minimize duplication and overlap with the new law.

The main change to the Listing Rules will be to remove the existing continuing disclosure obligations which will become part of the statutory regime. In addition, a range of amendments will be made consequential on the removal of these core provisions.

The majority of the respondents supported most of the Exchange’s consultation proposals. Having considered the responses, it has been decided to adopt the proposed rule changes, subject minor amendments based on the comments made. The revised rules will therefore take effect from January 1, 2013, the same date as the SFO’s statutory disclosure regime.

"The rule changes seek to, amongst other things, ensure that the obligations in the Listing Rules do not duplicate the statutory disclosure obligation. The Exchange will continue to monitor the market by making enquiries where appropriate," confirmed Mark Dickens, HKEx's Head of Listing.

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 http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
TAGS: investment | law | equity investment | offshore | legislation | stock exchanges | Hong Kong | standards | regulation

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