Hong Kong Exchanges and Clearing Limited (HKEx), published today (Friday) the Exposure Conclusion on the “Abolition of Requirement for Main Board Issuers to Publish Paid Announcements in Newspapers and Related Matters” (Exposure Conclusion), which summarises the main comments raised in response to the Exposure Paper, and sets out the final conclusions of HKEx on the way forward.
HKEx received comments from a total of 40 respondents and the overwhelming majority expressed support for the abolition of the requirement. Based on the responses received, some key conclusions are as follows:
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As an interim measure, the short-form announcement Main Board issuers will be required to publish in newspapers will be a notification rather than a summary announcement. Phase 1 as described in the Exposure Paper, ie the transitional period during which Main Board issuers will be required to publish the notifications will last six months;
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Full announcements of Main Board issuers will be published on the HKEx website. A Main Board issuer must also publish the full announcement on its own website (if any). A Main Board issuer without its own website must publish the full announcement in the newspapers as well as on the HKEx website;
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One year after the commencement of Phase 1 every issuer must have its own website where the public must be able to access documents free of charge. For the purposes of this requirement, the issuer’s website does not need to be hosted on a domain owned or directly operated by the issuer. The issuer’s website may be hosted on a third-party domain so long as the website is assigned a dedicated location on the Worldwide Web and the website may be maintained by third-party providers.
Most proposals in the Exposure Paper will either be adopted or adopted with modifications. Further information on this is available in the section entitled “Operational Model” below.
HKEx believes that the abolition of the requirement to publish paid announcements in newspapers and the introduction of news dissemination-related enhancements will benefit the market as a whole. Among the advantages of web-based dissemination are the timeliness of disclosure, the cost effectiveness of disclosure and the widespread availability of the disclosed information. The electronic dissemination of issuers’ Listing Rules-related announcements through the HKEx website – a single, official, centralised location that can be easily accessed by both local and overseas investors – will bring HKEx into line with other leading international equity markets.
HKEx will make a further announcement in due course regarding the commencement date for Phase 1 (which is currently intended to be at least six months after the publication of the Exposure Conclusion and also subject to operational readiness). The Exposure Conclusion is available on the HKEx website athttp://www.hkex.com.hk/eng/newsconsul/mktconsul/documents/npa.pdf.
Background
Main Board issuers are currently required under the Main Board Listing Rules to publish announcements by way of paid advertisements in at least one English-language and one Chinese-language gazetted newspaper. Since May 2001, they have also been required to submit electronic copies of announcements for parallel publication on the HKEx website.
The subject of whether the paid announcement requirement should be abolished has been considered at length for over five years. An initial consultation was conducted in 2000 and the decision to abolish paid announcement was made after taking into account the views of all stakeholders.
On 18 November 2005, HKEx published an Exposure Paper on the “Abolition of Requirement for Main Board Issuers to Publish Paid Announcements in Newspapers and Related Matters” (Exposure Paper). The Exposure Paper is available on the HKEx website at http://www.hkex.com.hk/eng/newsconsul/mktconsul/cpbefore2005.htm. The Exposure Paper sets out in detail HKEx’s proposals on the way forward.
In the Exposure Paper, HKEx proposed that the total abolition of the requirement for Main Board issuers to publish announcements in the newspapers for the purpose of the Listing Rules should be preceded by a transitional period (Phase 1). The purpose of the transitional period is to prepare the market for the total abolition of the paid announcements.
The Exposure Paper sought market views on:
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whether the short-form announcement Main Board issuers would be required to publish in newspapers, as an interim measure, should be a summary announcement or a notification; and
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the appropriate duration of the interim measure.
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The comment period for the Exposure Paper closed on 13 January 2006. HKEx received comments from a total of 40 respondents. The comments received are available on the HKEx website athttp://www.hkex.com.hk/eng/newsconsul/mktconsul/cpbefore2005.htm.
After careful consideration of the responses, HKEx published today the Exposure Conclusion on the way forward. The full report is available on the HKEx website at http://www.hkex.com.hk/eng/newsconsul/mktconsul/documents/npa.pdf.
Operational Model
HKEx sets out below a summary of the key features of the operational model as proposed in the Exposure Paper.
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Full announcements of Main Board issuers would be published on the HKEx website.
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Use of HKEx’s Electronic Publication System (HKEx-EPS) for submission of documents for publication on the HKEx website and GEM website would be mandatory.
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The current 9:00pm deadline for submission by Main Board issuers of documents for publication on the HKEx website would be extended to 11:00pm. There would be strict enforcement of the 11:00pm deadline.
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Where the 11:00pm submission for publication deadline fell on a business day immediately preceding a day which was not a business day, there would be a two-hour window (between 6:00pm and 8:00pm) on the day immediately preceding the next following business day during which time issuers might submit documents through HKEx-EPS for publication.
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Main Board issuers would be required to publish a short-form announcement (either a notification or summary announcement) in newspapers on the next business day. This requirement would be only for a transitional period, after which short-form announcements would not be necessary.
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A short-form announcement relating to, among other things, a pre-vetted announcement would also be posted on HKEx’s AMS/3 terminals.
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The short-form announcement would not require clearance from the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEx, prior to publication.
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The short-form announcement must state where on the Internet the full announcement could be viewed.
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Where a Main Board issuer published a short-form announcement in the newspapers, it must make the full announcement available for inspection during business hours at no charge at certain prescribed locations and provide a copy of the announcement free of charge to any person upon request.
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A Main Board issuer must also publish the full announcement on its own website (if any). The requirement for a Main Board issuer to publish on its own website would cover all documents requiring publication on the HKEx website. This would be similar to the existing requirement for GEM issuers. Publication on an issuer’s own website should be effected simultaneously with submission of the electronic copy to HKEx for publication and in any event must be no later than one hour after such submission. As with GEM issuers, the announcement or other document must remain on the issuer’s website for at least five years.
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A Main Board issuer without its own website must publish the full announcement in the newspapers as well as on the HKEx website.
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An issuer may voluntarily choose to publish the full announcement in the newspapers in addition to publication on the HKEx website and on its own website (if any).
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All documents required to be published on the HKEx website or GEM website must set out in a prominent position at the top of the document certain prescribed headlines. The short-form announcement must also contain the same headlines in a prominent position at the top. The same headlines must also be selected when submitting the document for publication through HKEx-EPS.
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Short-form preliminary results announcements would no longer be requested.
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In the case of Main Board and GEM new listing applicants, a written confirmation from the sponsor confirming that it had reviewed the announcement and was satisfied that it was appropriate for publication must be received by the Exchange prior to the announcement being submitted through HKEx-EPS for publication.
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Based on the responses received, HKEx has decided that:
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Phase 1 as described in the Exposure Paper, ie the transitional period during which Main Board issuers will be required to publish notifications in the newspapers instead of the announcement, will last six months.
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HKEx has, where appropriate, modified areas of the original proposal as set out in the Exposure Paper so as to reflect respondents’ views, address their concerns and/or provide further clarity. HKEx sets out below the principal modified areas which differ from the proposals set out in the Exposure Paper.
Every issuer should be required to have its own website
SEHK has incorporated into the Rule amendments a requirement that every issuer must have its own website where the public must be able to access documents free of charge.
The advantage of an issuer having its own website is that, in addition to the HKEx website, there will be another website where all the issuer’s regulatory documents can be found. This would also act as an alternative database in the unlikely event of a failure on the HKEx website or other adverse contingency.
So as to give issuers sufficient time to comply, this requirement will not take effect until one year after the commencement of Phase 1.
As shown in the following chart, a Main Board issuer that does not have its own website will, before the requirement for all issuers to have their own websites becomes effective, be required to publish its Listing Rule announcements in the newspapers in addition to publication on the HKEx website. Upon the requirement becoming effective, a Main Board or GEM issuer that does not have its own website will be in breach of the Listing Rules.
Deadline for publication on issuer’s own website
SEHK has revised the deadline for publication on the issuer’s own website to 9:00am of the following business day in cases where a document was submitted for publication on the HKEx website or GEM website after 7:00pm. This will give the issuer’s staff or external service providers more time to arrange for publication on the issuer’s own website.
In all other cases, publication on the issuer’s own website must be within one hour of such submission, as originally proposed.
Issuers to charge reasonable fees for copies
The Rule amendments have been revised to permit Main Board issuers to charge a reasonable fee for providing copies of announcements where the issuer has published a notification in the newspapers and made the full announcement available for inspection.
Minimum size of notifications
The minimum size for notifications has been revised to 8 centimetres by 10 centimetres, the same size as for notices of annual general meetings.
Headline categories
SEHK has reduced the number of headline categories so as to facilitate the selection process for issuers.
SEHK has revised the Rule amendments to incorporate the list of headline categories as an Appendix to the Listing Rules for easy access by issuers and market practitioners.
SEHK has revised the Rule amendments to remove the requirement that the headlines be set out “in a prominent position at the top of the document” in the case of the full announcement. The full announcement itself contains detailed information on the subject matter and there should therefore be no need to require the same degree of prominence for headlines in the full announcement. The purpose of the notification is merely to notify the public of the publication of an announcement on the HKEx website and the issuer’s own website and in the interests of keeping the notification reasonably short. Therefore, SEHK has revised the Rule amendments to provide that, where there are multiple headlines, the issuer must display in the notification only those headlines which together best describe the subject matter of the full announcement. For the purpose of submission of the full announcement through HKEx-EPS, all appropriate headlines must be selected regardless of the number.
During the HKEx-EPS submission process, SEHK will require the title of the announcement or other document to be input into a designated free-text field. HKEx believes that the inclusion of case-specific information will serve as a further aid in identifying relevant documents among a list generated by an online search.
Suspension announcements
At present, a suspension of trading in the securities of an issuer is first notified to the public by means of a short notice prepared by HKEx which is published on the HKEx website or GEM website.
So as to streamline the notification process, SEHK will include a provision in the Listing Rules to the effect that, where an issuer requests a suspension of trading in its securities and the suspension has been effected, the issuer must immediately submit through HKEx-EPS to HKEx for publication on the HKEx website or GEM website a ready-to-publish electronic copy of an announcement informing that trading in the securities of an issuer has been suspended and setting out briefly the reason for the suspension. Upon receipt of the electronic copy from the issuer, such an announcement will be published by HKEx provided the suspension has been effected. The announcement must also be published on the issuer’s own website.
Board meeting notifications
Under the Listing Rules, issuers are required to give SEHK seven days’ advance notice of any board meeting at which the declaration, recommendation or payment of a dividend is expected to be decided or at which any announcement of the profits or losses for any year, half-year or other period is to be approved for publication. In the case of Main Board issuers, HKEx currently compiles and publishes a list of such board meetings on the HKEx website. In the case of GEM issuers, the GEM Listing Rules require the issuer to publish an announcement on the matter on the GEM website.
HKEx believes the dissemination procedure for the Main Board and GEM should be streamlined and that the GEM model is to be preferred. Therefore, upon implementation of Phase 1, Main Board issuers will also be required to publish announcements of such board meetings directly on the HKEx website in the same way that such announcements are currently published by GEM issuers on the GEM website. As Main Board issuers are currently not required to publish such announcements in the newspapers, it is sufficient for the announcement to be published on the HKEx website and the issuer’s own website without a notification in the newspapers during Phase 1. Therefore, there should be no extra costs for the issuer upon implementation of the proposal. SEHK has included this new requirement in the Rule amendments.
Text file notifications no longer to be published on AMS/3 trading devices
Before the implementation of Phase 1, HKEx will introduce a new function whereby a news alert message will be sent to AMS/3 trading devices and MDF subscribers whenever an issuer announcement is published on the HKEx website or GEM website. So as to avoid potential duplication, issuers will no longer be required, with effect from the implementation of Phase 1, to send to HKEx any text files for publication on the AMS/3 trading devices and to MDF subscribers.
Sponsor's confirmation
It was proposed in the Exposure Paper that, in the case of Main Board and GEM new listing applicants, SEHK would require the sponsor to give a written confirmation that it had reviewed the announcement and was satisfied that it was appropriate for publication on the HKEx website or GEM website prior to the announcement being submitted through HKEx-EPS for publication.
SEHK has modified the wording of the written confirmation to be given by a sponsor of Main Board and GEM listing applicants prior to the announcement being submitted through HKEx-EPS for publication to align it with the sponsor’s existing overall responsibility with respect to the contents of the announcement. SEHK has revised the Rule amendments to require that the confirmation be that the announcement has been cleared by SEHK (where such clearance is required under the Listing Rules) or that the document is required to be published by the new applicant (where such clearance is not so required).
Operational readiness
HKEx is committed to providing the investing public with a secure, efficient and reliable access to all issuer announcement information through free access to the HKEx website. To cater for the increase in investors using the HKEx website after the abolition of the paid announcement requirement, HKEx is in the process of upgrading the capacity of the HKEx website and further enhancing the user-friendliness and functionality of the HKEx website particularly in relation to the presentation and the searching of issuer information.
To help ensure users are adequately prepared for the changes to the HKEx-EPS, HKEx is updating its training and technical materials, and it will produce an interactive e-learning module. Furthermore, there will be a help-line to answer enquiries on the HKEx-EPS and HKEx plans to host seminars for issuers and professional advisers as well as provide them with the opportunity for hands-on familiarisation with the system prior to launch. Further details will be announced in due course.
HKEx will publish contingency measures in relation to certain specific situations and include them in the HKEx-EPS user manual. If and when it becomes necessary to invoke any particular contingency measure, HKEx will publish relevant contingency arrangements on the HKEx website. These may provide for the use of diskettes or CD ROMs. However, such arrangements would only come into effect if and when, in SEHK’s determination, there were problems with HKEx-EPS preventing generally the timely submission of documents to HKEx for publication. An issuer would not be permitted to invoke such contingency arrangements unilaterally.
To facilitate public access to information on the HKEx website, a facility will be made available in a public reading room adjacent to the Trading Hall where investors can access the HKEx website, the GEM website and the website of the Securities and Futures Commission and search and view issuers’ announcements, notices and other documents.
The HKEx website currently provides a free service which sends subscribers email and mobile phone alerts for the latest news and disclosure of interests notices for up to any 10 designated issuers per account. Upon receiving an alert, the investor can review the relevant details from either the HKEx website or other preferred sources. HKEx believes this free service enhances the dissemination of issuer information to the investing public, and will continue to promote the usage of this service.
Way forward
The abolition of the paid announcement requirement will also lay the foundation for a news dissemination model (being considered for the medium term) whereby issuers’ announcements are released at any time during the day, including during trading hours, and the majority of announcements are not vetted prior to their release. Such a model will facilitate the full and timely disclosure of price-sensitive information, as well as reduce the incidence of trading suspensions, thereby contributing to enhanced investor confidence in the Hong Kong market.
Rule amendments
The amendments to the Main Board Listing Rules for notifications are set out in Appendix C to the Exposure Conclusion. These provisions will be implemented during Phase 1 only. The other major Listing Rule amendments are set out in Appendix D to the Exposure Conclusion. These comprise amendments to both the Main Board Listing Rules and the GEM Listing Rules.
The list of headline categories is set out in Appendix E to the Exposure Conclusion. This will be incorporated into the Main Board Listing Rules as a new Appendix 24 and the GEM Listing Rules as a new Appendix 17.
A full text of all the Rule amendments can be viewed on the HKEx website athttp://www.hkex.com.hk/eng/newsconsul/mktconsul/documents/nparule.pdf.
SEHK proposes to make some further minor revisions to the Listing Rules for the purpose of fine-tuning certain aspects of the operational model. Details of the revisions will be announced in due course.
Implementation
As stated in the Exposure Paper and mentioned above, HKEx is undertaking a number of operational readiness initiatives. HKEx-EPS will be relaunched (and users will be required to register or re-register, as the case may be). Implementation of the proposals will be subject to operational readiness. HKEx will make a further announcement in due course regarding the commencement date for Phase 1 (which is currently intended to be at least six months after the publication of the Exposure Conclusion).