Note to subscribers for the amendments to
the rules governing the listing of securities (the "Listing Rules")
Update No. 84
13 November 2006
Various amendments to the Listing Rules
We enclose reprinted pages of the Listing Rules. The reprinted pages incorporate:-
- amendments to the Listing Rules relating to the regulation of Sponsors and Compliance Advisers;
- amendments to the Listing Rules in respect of structured products;
- amendments to the Listing Rules regarding the number of deputy chairmen on the Listing Committee; and
- amendment to the Listing Rules relating to the role of the Chairman of the Securities and Futures Commission (SFC).
We also enclose the filing instructions.
Amendments relating to the regulation of Sponsors and Compliance Advisers
In October 2004 the Exchange and the SFC concluded a joint consultation regarding the regulation of Sponsors, Compliance Advisers and independent financial advisers. In the consultation conclusions report published on 19 October 2004 (the 2004 Conclusions) the Exchange and the SFC stated that, in the light of responses to the consultation, going forward, the SFC, as statutory regulator, would be responsible for assessment of eligibility, on-going supervision, discipline and enforcement of the conduct of corporate finance advisers who discharge the work of Sponsors and Compliance Advisers, whilst the Exchange, as market operator, should continue to be responsible for implementation and administration of the Listing Rule requirements including the practice notes on due diligence.
The 2004 Conclusions stated that the SFC would consult in relation to amendments to its licensing regime and that once that consultation was completed, in order to avoid regulatory duplication, the Exchange intended to remove the existing eligibility criteria from the Listing Rules.
The SFC has completed its second phase consultation. It published consultation conclusions in April 2006. Consequently, the Exchange now intends to amend the Listing Rules as anticipated in the 2004 Conclusions.
The key Listing Rule amendments are set out below.
- Currently, in order to undertake work as a Sponsor or Compliance Adviser, a firm must be acceptable to the Exchange. The Exchange has practices regarding what is acceptable. Consistent with removing regulatory overlap regarding the eligibility of Sponsors and Compliance Advisers, the Rules will be amended to provide that the Exchange will permit a firm to work as a Sponsor or Compliance Adviser provided the firm is appropriately licensed or registered by the SFC. For example, refer to the revised definition of Sponsor in Rule 1.01 and Compliance Adviser in Rule 3A.01.
- Similarly, the Exchange will no longer have any role in relation to monitoring a firm's ongoing eligibility to undertake Sponsor work or Compliance Adviser work. Again, consistent with the 2004 Conclusions, that will be the sole responsibility of the SFC.
- The Listing Rules will be amended such that the SFC alone will be responsible for the discipline and sanctioning of Sponsors and Compliance Advisers. However, the Exchange will continue to co-operate with the SFC in relation to relevant issues regarding the performance of Sponsors and Compliance Advisers, as appropriate.
Coming into effect
These Rule amendments will become effective on 1 January 2007 . Transitional arrangements are set out in new Rule 3A.31.
Amendments in respect of structured products
Chapter 15A of the Listing Rules has been amended in line with the recommendations set out in "Hong Kong's Derivative Warrants Market, the Way Forward, Results of the Conclusions on the SFC Six Point Plan" (the Consultation Conclusions) published by the SFC on 31 March 2006. The Consultation Conclusions recommended that:
- issuers should be permitted to launch Further Issues when they held up to 50% of an existing issue;
- the restrictions in respect of minimum issue price and life to maturity should be eased in the case of issues that are identical or substantially the same as existing issues; and
- commission rebate and incentive schemes should be banned.
The amendments to the Listing Rules give effect to these recommendations.
In addition, the current prohibition on issuance of structured products where an issuer possesses price sensitive information in respect of the underlying will no longer apply where the issuer maintains adequate information management arrangements.
Coming into effect
These Rule amendments became effective on 30 September 2006.
Amendments regarding the number of deputy chairmen on the Listing Committee
The Listing Rules have been amended to provide the flexibility for the Listing Nominating Committee to nominate and the Exchange Board to appoint more than one deputy chairman to the Listing Committee. The appointment of more than one deputy chairman will allow a reduction in the workload of the Deputy Chairman to the Listing Committee and also aid in succession planning for the role of Listing Committee Chairman.
Coming into effect
These Listing Rule amendments became effective on the date they were published, that is, 22 September 2006.
Amendments relating to the role of the SFC Chairman
Chapter 38 of the Rules sets out requirements relating to the listing of securities of Hong Kong Exchanges and Clearing Limited (HKEx) on the Exchange.
At the request of the SFC, Rule 38.08 has been amended to replace the reference to the SFC Chairman with a reference to the SFC Chief Executive Officer.
Coming into effect
This Rule amendment became effective on the date it was published, that is, 22 September 2006.
Please click HERE to see the amendments relating to the regulation of Sponsors and Compliance Advisers.
Please click HERE to see the the amendments in respect of structured products.
Please click HERE to see the the the amendments regarding the number of deputy chairmen on the Listing Committee and the amendments relating to the role of the SFC Chairman.
For and on behalf of
The Stock Exchange of Hong Kong Limited
Head of Listing