HKEx’s Consultation Conclusions – Review of Listing Rules Relating to Disciplinary Powers and Sanctions

HKEx’s Consultation Conclusions – Review of Listing Rules Relating to Disciplinary Powers and Sanctions

HKEx’s Consultation Conclusions – Review of Listing Rules Relating to Disciplinary Powers and Sanctions 1401 788 Hauzen

On 20 May 2021, the Hong Kong Exchanges and Clearing Limited (the “HKEX”) published the conclusions of its consultation on its review of the Listing Rules relating to disciplinary powers and sanctions (the “Consultation Conclusion”).

We summarize below the proposals adopted in this Consultation Conclusion. Mainly, the HKEx adopted the proposals to:-

  1. amend the existing threshold for imposing a public statement that the individual’s retention of office as a director is prejudicial to the interests of the investors (the “PII Statement”) and to make it clear that a PII Statement can be made whether or not an individual continues in office at the time of the PII Statement;
  2. extend the scope of a PII Statement to include directors and senior management of the relevant listed issuer and any of its subsidiaries;
  3. enhance follow-on actions on individuals whom have made a PII Statement;
  4. impose the requirement to include a reference to the PII Statement in all the named listed issuers’ announcements and corporate communications;
  5. enhancing disclosure requirements in listing documents and annual reports to include any public sanctions made against directors and members of the senior management;
  6. remove the existing threshold for the denial of market facilities;
  7. include fulfilment of specified conditions in respect of the denial of facilities of the market;

Further, the HKEx also introduced a “director unsuitability statement” as a new sanction, and will make the follow-on actions and publication requirement in respect of PII Statements also applicable to director unsuitability statements. In the case of serious or repeated failure by a director to discharge his responsibilities under the Listing Rules, the HKEx may require the director to sign a director unsuitability statement stating publicly that in the HKEx’s opinion, the director is unsuitable to occupy a position as a director or within senior management of a named listed issuer or any of its subsidiaries.

The HKEx also adopted the following proposals to enhance the disciplinary sanctions which can be imposed in additional circumstances:-

  1. impose secondary liability for breaches of the Listing Rules;
  2. include explicit sanction for failure to comply with requirements imposed by the Listing Division, Listing Committee or the Listing Review Committee of the HKEx;
  3. make failure to comply with requirements imposed by the Listing Division or the Committee a secondary liability;
  4. impose an obligation to provide complete, accurate and up-to-date information to the HKEx;
  5. define the term “senior management”;
  6. include employees of professional advisers as “Relevant Parties” under the Listing Rules;
  7. include guarantors of structured products and debt securities as “Relevant Parties”; and
  8. include parties who give an undertaking to, or enter into an agreement with, the HKEx as “Relevant Parties”.

The HKEx has also made minor amendments to the Listing Rules, which we have summarized as follows:-

  1. extend the ban on professional advisers to cover banning of representation of any or a specified party;
  2. include express obligations on professional advisers when acting in connection with Listing Rules matters;
  3. “business day” be used as the benchmark for counting periods for filing review applications, and for requesting or providing written reasons for decisions;
  4. all review applications must be served to the secretary to the HKEx Listing Committee or the secretary to the HKEx Listing Review Committee; and
  5. the period for filing review applications, requesting written reasons and providing written reasons must be counted from the date of issue of the decision or the written reasons, the date of issue of the decision and the date of receipt of the request.

The revised Listing Rules will be implemented with effect from 3 July 2021.

Contact us today to find out more about the changes made to the HKEx’s disciplinary powers and sanctions, or if you require assistance with HKEx enquiries or investigations.

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