Hong Kong listing policy regime set for shake-up

New independent panel will aim to enhance collaboration between SFC and HKEX on major listing policy issues and decisions

Governance and decision-making procedures behind Hong Kong’s stock market listing policy are set to be refined with the introduction of an independent board.

Announced on 15 September, a new Listing Policy Panel (LPP) will sit outside regulator the Securities and Futures Commission and operator Hong Kong Exchanges and Clearing (HKEX) as an “advisory, consultative and steering body”.

Its primary aim will be to “initiate and centralise discussions of listing policy with broader regulatory or market implications”.

The LPP will be set up under a Memorandum of Understanding between the SFC and HKEX, and will feature representatives from each party.

According to a joint SFC and HKEX statement, the Panel will have no rule-making powers, and its recommendations will not be binding upon any of the representatives.

However, it will serve as a “focal point” for new policy proposals, and enhance collaboration between the SFC and HKEX officials.

Emerging in the wake of a major review, the announcement resolves a spell of friction that had flared between the two entities over the future direction of Hong Kong’s listings policy – as The Treasurer reported just over a year ago.

In addition to recommending the establishment of the LPP, the review clarified how the watchdog and exchange manager should divide their responsibilities on policy matters.

A formal conclusions paper based upon the review points out that, in response to “changing market conditions and risks” – and to ensure that listing decisions are made in a transparent, efficient and accountable manner – the organisations will observe the following processes:

1. As statutory regulator, the SFC will continue its programme of targeted, early-stage intervention to protect markets and investors – for example, to prevent harm, misconduct or crime from taking place. This new approach has increased the SFC’s direct presence in more serious listing matters that fall within the scope of the Stock Market Listing Rules or the Securities and Futures Ordinance.
2. HKEX will continue to make key decisions under its Listing Rules, including decisions on suitability for listing. The role of its Listing Committee, as set out in those rules, will remain unchanged.

The paper notes that the SFC and HKEX “have been coordinating and cooperating on their respective regulatory actions under the new approach, in relation to both IPO and post-IPO issues, and will continue to do so going forward”.

SFC chairman Carlson Tong said: “The way forward will ensure that policy development is more agile, coordinated and responsive to emerging risks and market development imperatives, and that listing decisions are made in a transparent, efficient and accountable manner.

“Looking ahead, I believe the SFC and the Exchange are now well placed to meet the opportunities and challenges in driving Hong Kong’s competitiveness as an international financial centre.”

HKEX chairman CK Chow added: “As the financial market’s pace of change continues to increase, we need to build on the existing structure and coordinate our regulatory efforts to address new market challenges.

“I am confident that, by the Exchange and the SFC working together to address issues as they emerge, our market will continue to thrive and remain both high quality and robust.”

Find the full conclusions paper here.