Hong Kong Exchanges and Clearing Limited (HKEx) hopes the following information will clarify its position in relation to its guidance on how issuers may deal with journalists' questions. HKEx is aware that a press report today had misinterpreted the recommendations contained in the Guide on Disclosure of Price Sensitive Information (the guide) published by HKEx this January.
The principle function of the Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of HKEx, is to provide a fair, orderly and efficient market for the trading of securities. To this end, the Stock Exchange Listing Rules require issuers to make timely and even public disclosure of price-sensitive information. Further, all disclosure of information must be made in such a way that it does not place any person in a privileged dealing position.
The disclosure required under the Listing Rules is only the minimum mandatory standard. In order to promote fairness, transparency, accountability and responsibility, which are the core principles of good corporate governance, directors should consider the issuers' own circumstances when deciding whether any information is material and should be disclosed properly to the public.
Disclosure by issuers should be aimed at providing shareholders and the public with appropriate data and information on a timely and even basis, and not at merely meeting the minimum regulatory requirements. HKEx believes timely disclosure of accurate and quality information is in the issuer's interest as investors often give premium ratings to the most transparent companies.
The guide was published against this backdrop to help issuers and their directors meet their obligations under the Listing Rules while allowing them to inform the market of company developments.
Directors of issuers are required to make their own judgements as to what is price-sensitive information and when disclosure is required. They are also responsible to determine what information is material in the context of the issuer's business, operations and financial performance. Nevertheless, the principles and elaboration in the guide reflect some of the criteria that the Stock Exchange will consider in its interpretation of the Listing Rules to determine whether certain information is price-sensitive and when an announcement should be made. Some examples on particular situations and issues are also given in the guide.
They include an example on how issuers may deal with questions from journalists - a matter which has created much uncertainty on the part of issuers. In the guide, it is proposed that issuers should be prepared to give a "no comment" answer where journalists are pressing for unannounced price-sensitive information. It does not recommend, as some misinterpretations in the media have suggested, a "no comment" reply on the part of issuers when confronted with all questions from journalists about rumours in the market.
In contrast, the guide fully recognises that relationships with the press and other media often contribute to a well-informed market. It recommends that issuers may consider implementing means of broad communications such that the news will be disseminated to the public in a timely and uniform manner. Such means, among other channels, may be a press release through widely disseminated news or wire services and / or directly sent to international and local media.
The guide also proposes that issuers could consider opening up their meetings with analysts to the press and the public, or announcing in advance the fact of an analysts' meeting and, where price-sensitive information is to be made public, publishing at the same time the information to be disclosed as required by the Listing Rules.
The guide does recommend careful management of relationships with journalists where price-sensitive information is involved. In the case of inaccurate reporting, the guide suggests that the issuer should consider clarifying the situation by issuing an announcement and, if necessary, seeking a suspension of trading in the company's securities until the announcement is made. It does not recommend, as today's press report has suggested, the issuer should not clarify the inaccurate report until the announcement is made.
The guide also proposes that where sufficient price-sensitive information has emerged for the reported story to be broadly accurate, an issuer should ensure that an announcement is made to guarantee that the correct information is widely available. This is preferable to attempting to refute or play down the story.
HKEx strongly recommends those who are interested in the guide should read through the entire document and focus on the spirit of the guidelines rather than select phrases. HKEx published an article in the March issue of its quarterly newsletter, the Exchange, to help issuers and the news media better understand its position relating to the guide. Issuers are encouraged to consult their case officers at the Stock Exchange when in doubt about the proper disclosure of information.