The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a guidance letter (GL) for listed issuers subject to rumours or market commentarieswith allegation of fraud, material accounting or corporate governance irregularities(together, allegations) that may require a halt of trading in their securities.

The GL outlines a revised Exchange approach that allows issuers that are subject to allegations and have applied for a trading halt to resume trading in their securities if they can address such allegations with a clarification announcement (e.g. a denial of allegations).

The GL also sets out the issuers' obligations in handling allegations.  If, in the view of the Exchange, there is or there is likely to be a false or disorderly market in the issuer’s securities as a result of the allegations, the issuer must make a clarification announcement informing the market about its position regarding each allegation promptly or apply for a trading halt (see Notebelow).  If trading is halted, the issuer must ensure trading resumes as soon as practicable following publication of a clarification announcement.

The Exchange would not normally pre-vet the clarification announcement and, save for exceptional circumstances, would expect securities trading to resume following its publication.  The Exchange may thereafter follow up with the issuer on any further disclosures, reviews or investigations it considers necessary on matters that have arisen out of the allegations. Issuer announcements filed with the Exchange are subject to Section 384 of the Securities and Futures Ordinance and issuers are obligated to ensure they are not false or misleading in a material particular.

"The guidance letter sets out the Exchange's revised approach to handling issuers subject to allegations. Our revised approach is closer to the regulatory approaches of other markets and has the effect of keeping any necessary trading halt to the minimum consistent with our general approach to trading halts," said David Graham, HKEX's Chief Regulatory Officer and Head of Listing.

"In the interest of maintaining the reputation and efficiency of our market, we review our rules and practices from time to time to ensure that they have addressed developments in the market," Mr Graham added.

The guidance letter can be found on the HKEX website.

Note: See also the Exchange’s guidance letter (GL83-15) for principles and best practices in applying for trading halts.

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