Hong Kong SFC and HKEX conclude joint consultation on listing regulation

The Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today published the conclusions to their joint consultation on proposed enhancements to the Exchange’s decision-making and governance structure for listing regulation. After carefully considering market feedback, the SFC and the Exchange have decided to adopt the way forward as set out in the conclusions.

The conclusions clarify the role of the SFC as the statutory regulator which administers the Securities and Futures Ordinance (SFO) and the Securities and Futures (Stock Market Listing) Rules (SMLR), and which supervises, monitors and regulates the activities carried on by the Exchange, as well as the Exchange’s role as the regulator administering the Listing Rules. The role of the SFC as a statutory regulator has evolved to have a more direct presence in more serious areas of listing regulation.

A new Listing Policy Panel will be established as an advisory, consultative and steering body outside the SFC and the Exchange to initiate and centralise discussion of listing policies with broader regulatory or market implications.

Carlson Tong, SFC

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,” said Mr Carlson Tong, Chairman of the SFC. “The SFC, as the statutory regulator, will continue with its new front loaded approach to directly intervene in serious listing matters to protect our markets, and together with the enhancements announced today this will have a positive impact on both market quality and market development. 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.

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,” said Mr C K Chow, Chairman of HKEX. “Under the enhanced structure, the Exchange will remain listed issuers’ primary frontline regulator and its Listing Committee will continue to make decisions under the Listing Rules, including decisions on suitability for listing. We will continue to work hard in relation to our regulatory responsibilities, and 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.

The role of the Listing Committee under the Listing Rules will remain unchanged. Going forward, the Chief Executive of HKEX will attend Listing Committee meetings as a non-voting member representing the HKEX’s board only where listing policy matters are discussed, and will not attend Listing Committee meetings on individual cases.

The SFC will discharge its statutory oversight of the Exchange’s listing function through a materially enhanced, published audit of the Listing Committee and the Listing Department.

To enhance governance within the Exchange’s structure for reviewing the Listing Committee’s decisions, the Exchange will conduct a separate consultation in 2018 on the review system for decisions of the Listing Committee.

A summary table in Appendix 1 of the conclusions paper sets out the main consultation proposals and conclusions.

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