New listing framework to strengthen HK's role as financial centre

A restructured listing framework with an integrated Listing Committee, a streamlined listing process and strengthened enforcement of disclosure requirements will be introduced to enhance Hong Kong's position as a premier capital formation centre and its status as an international financial centre.

Announcing the decision today (July 24), the Secretary for Financial Services, Mr Frederick Ma, said the government, the Securities and Futures Commission (SFC), and the Hong Kong Exchanges and Clearing Limited (HKEx) had reached a consensus to introduce a package of measures to improve the present listing structure and procedures.

"Our aim is to create a market environment that is conducive to the listing of high quality companies in Hong Kong, especially corporations from the Mainland and Taiwan. This will strengthen Hong Kong's position as a premier international financial centre," he said.

The three-pronged package covers:

- The establishment of an integrated Listing Committee with a remit to decide on Main Board and Growth Enterprise Market (GEM) listings and de-listings. The Committee will have broadly based participation of market users including issuers, intermediaries and investors.

- A streamlined listing process administered by high calibre experts with international experience. Senior executives will vet all applications to identify key issues. This will shorten approval time and help reduce the overall listing costs. And,

- Strengthened back-end enforcement of disclosure requirements to ensure quality of information under the streamlined regime.

The new Listing Committee will begin operating from January 1, 2003. The new framework will be reviewed in about two years.

"The restructured listing framework will provide effective checks and balances, alleviate concerns about conflict of interests, and will be conducive to the development of the market," Mr Ma said.

"We are confident that the new measures will improve the quality of listed companies and strengthen Hong Kong's position as a premier capital formation centre in the region.

"Given the market environment, we also attach the utmost importance to upgrading corporate governance standards in Hong Kong."

Mr Ma said he was pleased to note the consensus reached by the SFC and HKEx to put forward the nomination of Mr Marvin Cheung Kin-tung, Mr Moses Cheng Mo-chi and Mr Vernon Francis Moore as candidates for the Chairmanship and Vice Chairmanship of the Listing Committee under the new framework.

The HKEx Chairman, Mr Charles Lee, said the new Listing Committee would consist of 24 to 30 independent members broadly based and representative of issuers, financial intermediaries and investors to be nominated by a Nomination Committee. The Chief Executive of the HKEx would also be an ex-officio member of the Committee to be supported by an integrated listing division of Hong Kong Exchanges and Clearing.

Decisions of the Listing Committee would be subject to appeal to a Listing Policy and Appeals Committee on specified grounds. A Disciplinary Appeals Committee would also be formed to hear appeals against disciplinary decisions. Both appeals committees would consist of two non-executive directors of HKEx and 10 to 13 independent members with broad representation.

In addition to the proposed new governance structure, Mr Lee said initiatives would be taken by the HKEx in the next few months to streamline the listing process and improve the quality of vetting.

Under the streamlined process, senior executives of the Listing Division would vet all applications up-front to identify key issues. The Listing Division would focus on the administration of the Listing Rules, while the listing applicants and their sponsors should assure the standard and the quality of the prospectus and related documents.

"The new approach is built on strengthened back-end enforcement. The guiding principle is that it is the responsibility of the listing applicants and their professional advisers to ensure full and proper disclosure of all material aspects of the listing applicant and its business and the associated risks," Mr Lee said.

He said the clarification of the division of responsibilities between the Listing Division and the listing applicants and their sponsors regarding quality of the prospectus would contribute to the healthy development of the securities market in Hong Kong.

The new streamlined approach will reduce the time for bringing a listing application to the Listing Committee, and in turn help reduce the costs of listing.

The implementation of the new listing process requires the support of market participants. The Listing Division will review the effectiveness and, if necessary, fine-tune the process after 12 months of full implementation.

In relation to back-end enforcement, the SFC Chairman Mr Andrew Sheng said: "In a securities market that is disclosure based, and where investor protection is centred on the reliability of what issuers disclose, it is unequivocally the responsibility of companies and their advisers, and in particular listed company sponsors, to ensure compliance with the rules and to ensure the quality of disclosure.

"With a clearer alignment of responsibilities under the new system, credible enforcement of our disclosure rules becomes of prime importance, hence the proposals announced on 6 May 2002 to firmly establish the Securities and Futures Commission as the statutory regulator of corporate information disclosure.

"The Commission will not hesitate to use the full range of enforcement options available to it under the new Securities and Futures Ordinance in order to tackle false or misleading disclosure by listed companies," Mr Sheng stressed.

The key elements of the new listing package and two flow charts on the proposed listing structure and listing process follow.

-Key elements of listing measures (doc format)
-Process overview in relation to non-disciplinary related listing matters after incorporating the proposed changes (doc format)
-Flowchart for the Proposed New Listing Process (doc format)
-Opening remarks by the Secretary for Financial Services and Technology at the press conference on the new listing package

Ends/Wednesday, July 24, 2002