New Proposals on Listing Matters in Hong Kong

The local securities market in the last quarter was characterised by uncertainty and gloom, due partly to global market upheavals and partly to policy reform announcements by the Hong Kong industry regulators. Such reforms relate to the listing approval process and, more controversially, certain circumstances that may lead to a company losing its listing status.

A revised adjudication structure

In May The Stock Exchange of Hong Kong Limited (Stock Exchange) announced proposals to reorganise the adjudication structure for various matters relating to listing approvals and listed companies.

Among the proposed reforms were abolishing the Listing Committee and putting in its place "one-stop listing decision making" and "one-stop appeals".

It will be remembered that, whilst the front-line work in processing listing applications and enforcing the Listing Rules is handled by the Stock Exchange's internal Listing Division, the power to approve a listing rests with the Listing Committee (or, in the case of the Growth Enterprise Market (GEM), the GEM Listing Committee). The Listing Committee currently comprises representatives from listed companies as well as industry professionals such as brokers, investment bankers, fund managers and accountants.

The current structure

Firstly let's look at the listing approval structure in force today. Currently, a listing application goes first to the Listing Division. The Listing Division may reject the application or recommend it to the Listing Committee. The applicant may have a ruling of the Listing Committee reviewed by the Committee twice (in the second instance the Listing Committee sits as the Listing (Review) Committee). Where the application is rejected on the ground of unsuitability for listing, the decision may be reviewed firstly by the Listing (Review) Committee and finally by the Listing Appeals Committee.

Many other kinds of non-disciplinary matters come under the jurisdiction of the Stock Exchange. Generally speaking, the adjudication structure for listing approvals applies also to other non-disciplinary matters.

The adjudication process for disciplinary matters relating to listed companies is similar, but not entirely the same. Under the current rules, an investigation is first carried out by the Listing Division. Where there is a potential breach of the Listing Rules, the matter is referred to the Listing Committee. The decision of the Listing Committee is subject to its own review and an appeal to the Listing Appeals Committee.

The May proposals

In May this year, the Stock Exchange proposed certain modifications to the current system. The changes included the setting up of a new division and two new...