In February 2005 Hong Kong Exchanges and Clearing Limited (HKEx) published a consultation paper on a new structure for listing decision-making (the Consultation Paper).
The Consultation Paper sought public comment about proposals aimed at putting in place a clearer and more efficient administrative framework for The Stock Exchange of Hong Kong Limited (the Exchange) to decide listing matters, whilst preserving the checks and balances necessary to minimise and manage regulatory risk.
HKEx received 18 submissions in response to the Consultation Paper including seven submissions from industry groups. The submissions are posted on the HKEx website at http://www.hkex.com.hk/eng/newsconsul/mktconsul/cpbefore2005.htm. HKEx is grateful to respondents for taking the time to comment.
In May 2005, after the close of the consultation, the Court of Appeal issued its judgment in the New World Development Company Limited and others (New World) judicial review appeal case. The Court allowed the appeal and quashed the direction of the Chairman of the Listing (Disciplinary) Committee in the New World disciplinary proceedings that legal advisers not be permitted to address the Listing (Disciplinary) Committee. The Exchange has been granted leave to appeal to the Court of Final Appeal. The hearing is set down for March 2006. The decision of the Court of Final Appeal may have an impact on the future model of hearings and procedures to be adopted by the Exchange.
HKEx has considered all of the responses to the Consultation Paper. Many respondents were supportive of some or all of the consultation proposals. However, HKEx has also been mindful of current uncertainties arising as a result of the continuing judicial review concerning the procedures of the Listing Committee and continuing consideration regarding which of the current obligations set out in the Main Board and Growth Enterprise Market (GEM) Listing Rules (the Rules) will be given statutory backing.
In light of these uncertainties, the Listing Committee has resolved to address the consultation proposals in two phases.
First phase
The first phase will involve a number of Rule amendments. The Rule amendments are set out on the HKEx website at http://www.hkex.com.hk/eng/rulesreg/listrules/mbrulesup/pages/mb_ruleupdate.aspx and
http://www.hkex.com.hk/eng/rulesreg/listrules/gemrulesup/pages/gemrule_update.aspx. Most significantly the Rules will be amended to:
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change the maximum term for Listing Committee and GEM Listing Committee members from the current term of three years for members and four years for the Chairman and Deputy Chairman to six years, in recognition of the fact that members may become more effective as they gain experience on the Committee; and
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change the composition of the Listing Nominating Committee such that the HKEx representatives are three non-executive members of the HKEx Board rather than two members of the HKEx Board and the Chief Executive of the Exchange.
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The first phase Rule amendments described at paragraph 4 above will become effective today. The balance of the first phase Rule amendments i.e. those described at paragraphs 1 to 3 above will become effective on expiry of the current term of office of the Listing Committee members. The exact date will be announced in due course but it is likely to be in May 2006. That will enable time for the selection and appointment of new Listing Committee members, in particular, investor representatives.
Second phase
The second phase will be commenced once the relevant judicial review is resolved and further progress is made in settling the content of the proposed Stock Market Listing Rules, which will give statutory backing to some of the Rules.
In the second phase the Listing Committee will revisit the other consultation proposals set out in the Consultation Paper and determine which continue to be appropriate.
“The first phase Rule amendments will address the most significant concerns raised by respondents to the Consultation Paper, namely the size and composition of the Listing Committee. A membership of at least 28 including at least eight investor representatives will allow the Listing Committee to comprise an appropriate mix of market representatives. It will also provide flexibility to have more than 28 members and more than eight investor representatives if that is appropriate and feasible”, HKEx's Chief Executive, Paul Chow, said.
“We look forward to the Listing Committee continuing to make a significant contribution to the development of the Hong Kong market and investor confidence in our regulatory standards.”
The Consultation Paper is available at http://www.hkex.com.hk/eng/newsconsul/mktconsul/documents/25010063.pdf.