A transcript of the
Address by HKEx Chairman Charles Lee
at the Legislative Council's Financial Affairs Panel

Good afternoon, Mr Chairman and members,

HKEx's briefing today will be divided into two parts. I will discuss HKEx's current operations and reporting structures and mechanism in terms of the regulatory matters of listed companies. Then HKEx Chief Executive Kwong Ki-chi will report on the work involved in this market consultation and HKEx's prompt response to market concerns during the course of the incident.

HKEx's operations and reporting structures and mechanism on regulatory matters of Listed Companies

In accordance with the Memorandum of Understanding (MOU) Governing Listing Matters signed between the Securities and Futures Commission (SFC) and HKEx on 6 March 2000, the day of the merger of the exchanges under HKEx, the HKEx board has delegated all of its powers and responsibilities in relation to listing matters to the Listing Committee and the board will not exercise concurrent jurisdiction. Before a member of the Listing Committee is appointed by the Stock Exchange of Hong Kong, he must first be nominated by an independent Nomination Committee and approved by the SFC. Except for the HKEx Chief Executive, Listing Committee members are all independent market participants, including representatives from listed companies, securities dealers, financial intermediaries and investors. The Nomination Committee is comprised of three SFC representatives and three HKEx representatives.

Under the above delegation, the executives of the Listing Division are directly accountable to the HKEx Chief Executive and the Listing Committee on issues relating to the regulation of listed companies, and they report to the SFC and seek SFC approval on these matters. After it was signed in 2000, the MOU was released to the public and posted on the websites of both regulators.

Also, the administrative structure of HKEx ensures that a Chinese Wall exists within the organisation, totally segregating its business functions from the regulatory function.

The segregation arrangement eliminates any potential conflicts of interest between HKEx's business operations and regulation of listed companies.

In addition, HKEx is obliged to act at all times in the interest of the public under the Exchanges and Clearing Houses (Merger) Ordinance.

Accordingly, under the above mentioned regime, the published consultation paper was drafted by the Listing Division and agreed by the SFC before it was discussed by the Listing Committee and released to the market. During the process, it was never presented to the board of the HKEx for discussion.

In consulting the market on the Proposed Amendments to the Listing Rules Relating to Initial Listing and Continuing Listing Eligibility and Cancellation of Listing Procedures, we aim to enhance the overall quality of the Hong Kong stock market and provide a fair, orderly, efficient and transparent market for the trading of securities.

Now, Mr Kwong will report on the work involved in the market consultation and HKEx's prompt response to market concerns during the course of the incident.