Governance & Securities Law Focus: Asia Edition, July 2016

ASIA DEVELOPMENTS

The SFC and the Stock Exchange Launch Joint Consultation on Proposed Enhancements to the Stock Exchange's Decision-Making and Governance Structure for Listing Regulation

On 17 June 2016, the Securities and Futures Commission ("SFC") and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") jointly launched a consultation on proposed enhancements to the Stock Exchange's decision-making and governance structure for listing regulation (the "Proposals"). Under the Proposals, the Stock Exchange will continue to be the frontline regulator for listing matters. The SFC's powers and functions in relation to listing matters will remain unchanged, but the ways in which those powers and functions are exercised and performed will be enhanced.

The Current Regime

Under the existing regulatory regime, the Stock Exchange is responsible for making new Listing Rules and Listing Rule amendments, subject to the prior approval of the SFC. In addition, the SFC has powers under the Securities and Futures Ordinance (Cap. 571) to supervise and monitor the Stock Exchange in the performance of its listing function. The SFC may object to listing applications and listing applicants must file listing applications and draft listing documents with the SFC via the Stock Exchange.

To ensure the independence of the Stock Exchange's regulatory function, the board of directors of the Stock Exchange has delegated its powers and functions relating to listing matters, including formulation of listing policy, to the Listing Committee. The Listing Committee is currently comprised of 28 members, including representatives of investors, listed companies, market practitioners and the Chief Executive of Hong Kong Exchanges and Clearing Limited ("HKEX"). As members of the Listing Committee are only available on a part-time basis, the Listing Committee has delegated a range of listing powers and functions to be discharged by the Listing Department and the Chief Executive of the Stock Exchange. The Listing Committee has retained the role of oversight and acts as an independent review body for decisions made by the Listing Department and the Chief Executive of the Stock Exchange.

The Proposals

The Proposals introduce structural and procedural enhancements to the above regulatory and decision-making process. Two new committees, each with equal representation from the SFC and the Stock Exchange, will be established. For matters within the mandates of the new...