Hong Kong Securities and Futures Commission (SFC) chief executive Ashley Alder has been forced to defend proposed reforms to the territory’s stock listings regime.
As The Treasurer reported last month, the reforms would create two, new supervisory agencies run by equal numbers of staff from SFC and primary stocks regulator Hong Kong Exchanges and Clearing (HKEX).
In addition, the SFC would provide earlier, and more direct, input on listings-based policy and regulatory matters.
However, following the launch of a consultation on those measures, Lo Ka-shui – vice chair of the Chamber of Hong Kong Listed Companies – said that the plans would hand too much power to the SFC.
That course of action, he warned, could lead to a wave of over-regulation that “may kill off the IPO market”.
Echoing that opposition, HKEX director Vincent Lee cast doubt on his organisation’s backing for the proposals – claiming that, while they had been prepared by staff on his team, they had not yet received full, board approval.
Responding to Lo and Lee’s comments, Alder said: “The reforms are aimed at creating an efficient, focused and publicly accountable one-stop shop to quickly get on top of – and pursue – complex listing policy options, to set the right conditions for a flourishing, competitive and healthy market.”
The proposed measures, he added, would slash “ping pong” between SFC and HKEX, leading to a quicker decision-making process on regulatory matters. Criticism of the measures, he noted, was “based on a flawed understanding” of the consultation.
Alder has won the backing of SFC founding chair Robert Owen, who ran the organisation from 1988 to 1992.
Speaking to the South China Morning Post, Owen explained: “The [HKEX] Listing Division presently reports to the Listing Committee, which consists of people with market experience – but they are part-timers and cannot exercise effective oversight of the division.”
He added: “The current proposals would be an improvement by transferring the role of overseeing the listing division to a more appropriate body, in the form of the proposed new Listing Policy Committee.” That, he said, “should generally improve coordination between the SFC and the Listing Committee and Listing Division”.
That view was shared by former Hong Kong secretary for financial services and the treasury, Frederick Ma Si-hang, who told the Post: “It would be much better for the SFC to be able to express its opinions at an early stage on listing policy setting and on some complicated listing applications.
“This would be better than the current structure, where the SFC [can only] veto the listing related decision at the final stage.”
Not long after Owen and Ma Si-hang spoke out, though, Hong Kong Legislative Council member Christopher Cheung Wah-fung added his voice to the chorus of disapproval around the proposals.
In light of a year-on-year, 38% slump in HKEX profits for the second quarter of 2016, he said: “If the securities sector believes the proposed listing reforms will kill off the listing market, I would definitely oppose [them].”
He added: “The Hong Kong stock market [has] seen a low turnover and few listings [this year]. Many brokers are worried their rice bowls may be broken with a quiet market.”