Note to subscribers for the amendments to the rules governing the listing of securities on the Growth Enterprise Market (the "GEM Listing Rules")
Update No. 22
13 November 2006
Dear Sirs,
Various amendments to the GEM Listing Rules
We enclose reprinted pages of the GEM Listing Rules. The reprinted pages incorporate:–
- amendments to the GEM Listing Rules relating to the regulation of Sponsors and Compliance Advisers; and
- amendments to the GEM Listing Rules regarding the number of deputy chairmen on the GEM Listing Committee.
We also enclose the filing instructions.
Amendments relating to the regulation of Sponsors and Compliance Advisers
In October 2004 the Exchange and the SFC concluded a joint consultation regarding the regulation of Sponsors, Compliance Advisers and independent financial advisers. In the consultation conclusions report published on 19 October 2004 (the 2004 Conclusions) the Exchange and the SFC stated that, in the light of responses to the consultation, going forward, the SFC, as statutory regulator, would be responsible for assessment of eligibility, on-going supervision, discipline and enforcement of the conduct of corporate finance advisers who discharge the work of Sponsors and Compliance Advisers, whilst the Exchange, as market operator, should continue to be responsible for implementation and administration of the GEM Listing Rule requirements including the practice notes on due diligence.
The 2004 Conclusions stated that the SFC would consult in relation to amendments to its licensing regime and that once that consultation was completed, in order to avoid regulatory duplication, the Exchange intended to remove the existing eligibility criteria from the GEM Listing Rules.
The SFC has completed its second phase consultation. It published consultation conclusions in April 2006. Consequently, the Exchange now intends to amend the GEM Listing Rules as anticipated in the 2004 Conclusions.
Key amendments
The key GEM Listing Rule amendments are set out below.
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Currently, in order to undertake work as a Sponsor or Compliance Adviser, a firm must be approved by the Exchange and admitted to the list of Sponsors maintained by the Exchange. The GEM Listing Rules set out detailed eligibility criteria for admission to the Sponsor list. The Rules also provide that generally Sponsors' eligibility to remain on the list is reviewed by the Exchange annually.
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Consistent with removing regulatory overlap regarding the eligibility of Sponsors and Compliance Advisers, the GEM Listing Rules will be amended to provide that the Exchange will permit a firm to work as a Sponsor or Compliance Adviser provided the firm is appropriately licensed or registered by the SFC. Also, the whole of Chapter 6 of the GEM Listing Rules will be repealed although some Rules that were in Chapter 6 will be retained under Chapter 6A.
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Similarly, the Exchange will no longer have any role in relation to monitoring a firm's ongoing eligibility to undertake Sponsor work or Compliance Adviser work. Again, consistent with the 2004 Conclusions, that will be the sole responsibility of the SFC. Amongst other things, this means that the Exchange will no longer undertake annual reviews of Sponsor firms nor maintain a list of approved Sponsors.
- The GEM Listing Rules will be amended such that the SFC alone will be responsible for the discipline and sanctioning of Sponsors and Compliance Advisers. However, the Exchange will continue to co-operate with the SFC in relation to relevant issues regarding the performance of Sponsors and Compliance Advisers, as appropriate.
Coming into effect
These Rule amendments will become effective on 1 January 2007 . Transitional arrangements are set out in new Rule 6A.38.
Amendments regarding the number of deputy chairmen on the GEM Listing Committee
The GEM Listing Rules have been amended to provide the flexibility for the Listing Nominating Committee to nominate and the Exchange Board to appoint more than one deputy chairman to the GEM Listing Committee. The appointment of more than one deputy chairman will allow a reduction in the workload of the Deputy Chairman to the GEM Listing Committee and also aid in succession planning for the role of GEM Listing Committee Chairman.
Coming into effect
These Rule amendments became effective on the date they were published, that is, 22 September 2006.
Please click HERE to see the amendments relating to the regulation of Sponsors and Compliance Advisers.
Please click HERE to see the amendments regarding the number of deputy chairmen on the Listing Committee.
Yours faithfully
For and on behalf of
The Stock Exchange of Hong Kong Limited
Richard Williams
Head of Listing