The Stock Exchange of Hong Kong Limited (Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), published today (Friday) a new statement on its approach to enforcement of its Listing Rules (Enforcement Statement), and implemented new procedures for disciplinary matters involving breaches of the Listing Rules (New Procedures).  The New Procedures will apply to disciplinary proceedings commencing from today. 

As the frontline regulator of listed issuers in Hong Kong, the Exchange has a statutory duty to ensure, so far as reasonably practicable, an orderly, informed and fair securities market in Hong Kong.  Enforcement is an important tool by which this regulatory objective may be achieved.

Enforcement of the law takes priority over enforcement of the Listing Rules.  The Exchange will report conduct which may amount to possible breaches of the law to the appropriate law enforcement authorities and will suspend its investigation if it overlaps with their investigation to avoid duplication of regulatory resources and possible prejudice to their enforcement action.  

“The publication of the Enforcement Statement and the Statement on sanctioning criteria attached to the New Procedures are part of our continuing efforts to enhance transparency of the decision-making process involved in our enforcement of the Listing Rules”, said David Graham, HKEx’s Chief Regulatory Officer and Head of Listing.

“We haveenhanced case management powers for the chairman of a Disciplinary Committee to expedite disciplinary proceedings and ensure that regulatory outcomes are delivered in a timely and efficient manner whilst balancing the need for fairness to the parties subject to disciplinary action,” added Mr Graham.  “There are also changes aimed at reducing the number of written submissions filed as a matter of course during the disciplinary process and to encourage earlier hearing dates.”

The new Enforcement Statement and the New Procedures are the results of an Exchange review conducted recently with a view towards expediting the resolution of enforcement matters and increasing market transparency.

Enforcement Statement and Statement annexed to New Procedures

The Enforcement Statement outlines, amongst other matters, the Exchange’s approach towards the enforcement of the Listing Rules and the criteria for assessing the appropriate level of enforcement action.  It also contains a number of reminders on the Exchange’s continuing expectations with respect to compliance related matters.

The Statement annexed to the New Procedures contains the general principles and factors that a Disciplinary or Review Committee of the Listing Committee should generally take into account when considering and determining sanctions and directions for breaches of the Listing Rules.  It is designed to assist a Disciplinary or Review Committee in achieving consistency in determining and imposing sanctions.  

The New Procedures

The New Procedures represent a continuing effort on the part of the Exchange to improve the efficiency, timeliness and effectiveness of its enforcement actions.  They ensure that parties subject to disciplinary actions have the right to be heard and that the Exchange will observe the principles of natural justice and due process.

The New Procedures are intended to enable the Listing Committee to deal with all disciplinary matters expeditiously and on the merits.  They are designed to be flexible.  The process remains informal and will continue to be conducted primarily through written submissions.

More case management powers have been given to the Chairman of a Disciplinary Committee.  The Chairman can make directions in respect of the procedural matters of a disciplinary action to suit the circumstances of a particular case and in the interests of justice.  For instance, instead of adhering to a standard procedural timetable, the Chairman can make directions in respect of the filing of submissions and evidence, and the conduct of the proceedings, taking into account the particular circumstances of the case.  The objective is to achieve a just and expeditious resolution of the proceedings.  

As part of the measures to improve efficiency of the disciplinary process and therefore to ensure timely delivery of regulatory outcomes, parties to a disciplinary action must strictly adhere to all time limits provided for in the New Procedures and under the Chairman’s directions.  The Chairman will consider reasonable requests for time extensions and may grant time extensions of such duration as deemed appropriate in his sole discretion.  However, time extensions will only be granted in exceptional circumstances. 

In addition, the Chairman is the sole decision maker on the date of a hearing (which will no longer be confined to a Tuesday) although he may, as a matter of courtesy, consult the parties before fixing a date.  A disciplinary hearing will be held when and where it is considered most convenient and appropriate in the circumstances, and the parties involved will be expected to arrange their schedules accordingly.  The Chairman will consider, in his sole discretion, timely requests for an adjournment of the hearing supported by reasons from the parties, and may require supporting evidence.

Any reviews will be heard as quickly as possible and on the basis of the materials presented to the Committee at first instance.  Generally, no further submissions from the parties should be required unless relevant and material new facts have emerged since the date of the report of the Listing Division.

The Enforcement Statement and New Procedures are available on the HKEx website.

Ends