The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) announced revised themes for enforcement of the Listing Rules and published a revised policy statement on its approach to enforcement (Enforcement Policy Statement).
"The identification of themes for targeted discipline and enforcement will assist us in achieving our goals for rule enforcement and using our existing resources more effectively. It is also useful from the perspective of market education in that we can inform the market of the Exchange'' enforcement priorities. In conjunction with this, as previously announced, the Exchange will roll out in the first quarter of this year a new training programme for directors that will cover a broad range of topics,"said David Graham, HKEX's Chief Regulatory Officer and Head of Listing.
Themed Approach to Enforcement
In line with the objectives for enforcement set out in the Enforcement Policy Statement of 2013, the Exchange adopted five themes for enforcement activity in 2014 to focus resources on particular areas of concern.1
Following a review, the Listing Committee has approved a modification and expansion as follows:
| (a) |
Directors' performance of fiduciary duties, and failure of issuers and directors to cooperate with the Exchange's investigation, remain as themes.
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| (b) |
The initial themes concerning late financial reporting resulting from internal control deficiencies and "heavily" qualified accounts have now been merged and expanded to become financial reporting – delays, or internal controls and corporate governance issues. As for the initial theme concerning failure of issuers (subject to prolonged trading suspension) and their directors to address the Exchange's concerns in a timely manner to procure trading resumption as soon as possible, it has now been expanded to become delayed trading resumption which also covers prolonged trading halts.
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| (c) |
Inaccurate, incomplete and/or misleading disclosure in corporate communication; failure to comply with procedural requirements in respect of notifiable/connected transactions; and repeated breaches of the Listing Rules are introduced as new themes. |
It should be noted, however, that notwithstanding this themed approach to investigation, the Exchange has continued and will continue to pursue any other breaches of the Listing Rules that may demonstrate sufficiently egregious conduct.
Revised Enforcement Policy Statement
The current Enforcement Policy Statement was published on 13 September 2013. The Statement has been reviewed and a number of administrative changes made to reflect current practice and bring the statement of enforcement policy up to date.
The revised Enforcement Policy Statement is available on HKEX website.
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The five themes approved by the Listing Committee were: (a) director's performance of fiduciary duties, particularly their exercise of care, skill and diligence required under the Listing Rules; (b) issuers delinquent in publishing accounts resulting from internal control deficiencies; (c) circumstances leading to "heavily" qualified accounts (i.e. with an adverse or disclaimer opinion by auditors) and directors' responsibilities; (d) failure of issuers (which are subject to prolonged trading suspension) and their directors to address the Exchange’s concerns in a timely manner to procure trading resumption as soon as possible; and (e) failure of issuers and directors to co-operate with the Exchange’s investigation. |
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