- Exchange recommends page limits for two more listing document sections
- Vetting may be suspended if listing documents are not succinct and focused on material information
- GEM Listing applications may be returned if fundamental issues are not clearly understandable after two rounds of comments from the Exchange
Clearly and succinctly drafted listing documents for equity securities of new applicants (listing documents) expedite the vetting process. With the aim of improving the quality and clarity of listing documents, The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), published today (Friday) two updated Guidance Letters - HKEX-GL86-16: “Guide on Producing Simplified Listing Documents Relating to Equity Securities for New Applications” and HKEX-GL56-13: “Guidance on (i) disclosure requirements for substantially complete Application Proofs; and (ii) publication of Application Proofs and Post Hearing Information Packs on the Exchange’s website”.
New recommended page limits
To further promote succinct listing documents focused on material information, the Exchange has adopted a recommended 20 page limit for each of the “History and Development” and “Applicable Laws and Regulations” sections of listing documents. These limits are in addition to the recommended 10 page limits for the “Summary and Highlights” and “Industry Overview” sections.
Possible suspension of vetting
The Listing Rules for the Exchange’s Main Board and Growth Enterprise Market (GEM) require information contained in a listing document to be clearly presented and in plain language (Main Board Rule 2.13, GEM Rule 14.26). HKEX-GL86-16 was published to help applicants and their advisers to meet this requirement. To encourage compliance with this guidance letter, the Exchange has decided that it may exercise its discretion to suspend vetting if:
- the listing document does not comply with any of the recommended page limits for specific sections; or
- information in the “Summary and Highlights” section is almost entirely copied-and-pasted from other sections, or does not contain explanation of material fluctuation of key financial data.
If vetting is suspended, the applicant must redraft relevant sections of the listing document to fully comply with HKEX-GL86-16 for vetting to resume. Suspension of vetting is not a return or rejection of the application so there is no need to upload the revised Application Proof onto the HKEXnews website and the initial listing fee will not be forfeited.
To give the market time to respond, the Exchange will commence exercising its discretion to suspend vetting for listing applications submitted after 11 September 2017.
Possible return of listing application
Given the increased number of GEM applications, the Exchange is drawing attention to the quality of the disclosure of the GEM listing documents. If fundamental issues in a GEM listing application, such as the applicant’s business model or operations, are not clearly understandable after two rounds of comments from the Exchange, it may be evidence that the listing application disclosure is not substantially complete. The Exchange may return the application in cases it considers appropriate.
Reminder about sponsor’s duty
“With the view to improving the quality and clarity of listing documents, we have decided that we may exercise our discretion to suspend vetting of an application or return an application as set out in the updated Guidance Letters published today,” said David Graham, HKEX’s Chief Regulatory Officer and Head of Listing. “We would also like to take this opportunity to remind sponsors of their duty to conduct proper due diligence under the new sponsor regime. Sponsors have the obligation to assist the applicants in preparing their replies to comments from the Listing Department and they themselves also have to be properly prepared to answer questions at Listing Committee and GEM Listing Approval Group hearings. Unresponsive or unclear answers to comments or questions may result in a return or rejection of the listing application.”
The updated Guidance Letters are available on the HKEX website.