With a view to bringing the regulatory regime of Hong Kong, which is fundamentally disclosure-based, more in line with its international counterparts and to assure the furtherance of investors' protection, the Securities and Futures Commission of Hong Kong (SFC) unveiled the Consultation Paper on the Securities and Futures (Stock Market) Rules in May 2002.
The disclosure regime of the securities market of Hong Kong has long been developed on the footing of the non-statutory Listing Rules, which impose non-statutory obligations on companies to disseminate information of certain transactions, examples being the disclosure of significant acquisitions or dispositions of assets if the value thereof relative to the value of the issued share capital of the company exceeds a specified percentage.
As Hong Kong's securities market continues to develop in diversity and complexity, the need for a statutory back up of its disclosure regime is increasingly clear. The SFC, having reviewed the market practice and regulatory mechanism of Hong Kong as well as those of other international markets, proposes the following recommendations as contained in the consultation paper:
- Companies that release information (including a prospectus and other listing documents) to the market must also file a copy with the SFC;
- Any person who intentionally or recklessly provides false or misleading information will be subject to sanction by the SFC;
- Investigatory power should be granted to the SFC in cases of suspected publication of false or misleading information to the public;
- Civil action may be initiated where the false or misleading disclosure is equipped with a market manipulation element; and
- Criminal liability may be attached, where appropriate, in the most serious cases, though this weapon is not to be employed causally.
With the release of this consultation paper, the SFC set its sights on more effective enforcement and the further bolstering of credibility and transparency of Hong Kong's regulatory regime.
The consultation period for the paper has closed in June and the SFC's response to the comments received is expected to be announced shortly.