HKEx hopes to clarify the public misunderstanding caused by serious mistakes in arguments that appeared today (Tuesday) in a press report on a letter from former Securities and Futures Commission (SFC) executive Alex Pang to the Financial Secretary. The report, which appeared in the Hong Kong Economic Times, was titled, "Former Securities and Futures Commission (SFC) senior executive Alex Pang wrote to the Financial Secretary bombarding Hong Kong Exchanges and Clearing (HKEx) on the deteriorating quality of listed companies".
A fundamental mistake of the report is tying the post-listing quality and operational performance of listed companies with the Stock Exchange's listing approval. When considering listing applications, the Stock Exchange will consider the merits of each case according to the Listing Rules. The Stock Exchange has never approved a listing application when the applicant failed to meet the listing requirements, and it would never approve such an application. The Stock Exchange would also be unable to reject a listing application if all listing requirements had been met. Nevertheless, the Stock Exchange's listing approval does not guarantee a successful listing. There have been times when companies' listing plans were delayed due to insufficient investor interest. The report mentioned a listing application that was eventually rejected by the Stock Exchange because the listing requirements were not met. That illustrated the Stock Exchange's stringent listing approval process.
After listing, the listed company's operations must be in line with the requirements of the Listing Rules, which include disclosing financial results to the public. If a listed company failed to comply with the Listing Rules, the Stock Exchange would consider taking disciplinary action. If a listed company engaged in illegal activity, the law enforcement authorities would penalise or prosecute the company. Concerning the quality of the management and the operation or performance of these companies, their senior management is responsible.
HKEx stresses that there are many areas in the Stock Exchange's Listing Rules for the Main Board and Growth Enterprise Market which are more stringent than the requirements of the US and UK markets. In addition, the Stock Exchange reviews its Listing Rules from time to time to ensure Hong Kong's corporate governance standards are in line with other major international markets. On May 24, HKEx concluded a market consultation on corporate governance that resulted in several hundred responses. The comments are now being analysed and HKEx will consider introducing rule changes at the earliest possible time.
HKEx plans to publish a consultation paper in the next two months to seek comments on proposed rule amendments on the delisting of companies that fail to meet the listing eligibility criteria on an ongoing basis. All the above initiatives will help improve the quality of the Hong Kong securities market.
HKEx restates that as a listed company, its profit-oriented and business-driven targets are based on the long-term interest of the Hong Kong market. Therefore, HKEx remains committed to upgrading market quality. Under the Exchanges and Clearing Houses (Merger) Ordinance, in discharging their obligations to ensure an orderly and fair market and/or to ensure that risks are managed prudently, HKEx, the Exchanges and the Clearing Houses are required to act in the interests of the public, having particular regard to the interests of the investing public, and to ensure that where such interests conflict with any other interests that each is required to serve under any other law, the former will prevail.
However, the management of a listed company is always responsible for its operations and the quality of its business.
The SFC's proposed statutory filing of corporate disclosure materials would bring the regulatory model of the Hong Kong securities market largely in line with that of the US, Australia and Singapore. The statutory disclosure of information in those markets is regulated by government bodies, whereas listing approval and the regulation of listed companies are still the responsibility of the New York Stock Exchange, the Australia Stock Exchange and the Singapore Stock Exchange.
HKEx was disappointed by recent misleading reports that said Hong Kong's stock exchange was the only listed exchange responsible for the regulation of other listed companies.
HKEx will continue striving to do its best to improve the quality of the Hong Kong securities market, which will bring long-term commercial benefits to Hong Kong, as well as HKEx.
