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Submission on the Proposed Statutory Codification of Certain Requirements to Disclose Price Sensitive Information by Listed Corporations

  • Consultation Papers
  • 2010.07.02

 

INTRODUCTION

  1. The Consumer Council (the Council) is pleased to provide its views on the consultation paper issued by the Financial Services and the Treasury Bureau (FSTB) regarding the proposed statutory codification of certain requirements to disclose price sensitive information (PSI) by listed corporations in Hong Kong.
     
  2. The Council pledges its full support of the FSTB's determination to promote a transparent and accountable disclosure regime for the listed corporations, with the aim of maintaining investor confidence and thereby enhancing reputation of Hong Kong as a leading international financial centre in the region.
     
  3. The following sets out the Council's views to some of the questions raised in the consultation paper that have direct implications to the interests of consumers/investors.

COUNCIL'S RESPONSE

Establishing the Statutory Disclosure Obligation

Q1 (a):     Do you agree with the proposal to adopt the existing definition of "relevant information" from the insider dealing regime under the Securities and Futures Ordinance (SFO) to define PSI?

  1. The Council agrees that there will be the advantage of familiarity for adoption of the definition of PSI from the existing definition of "relevant information" from the insider dealing regime under the SFO. However, the Council considers it important to give elaborations on what constitutes PSI to the extent possible so as to prevent listed corporations from putting up uncertainty as excuse for not meeting the requirements in disclosing PSI to the investing public. In this respect, the Council welcomes the Securities and Futures Commission's (SFC) proposed issue of the draft "Guidelines on Disclosure of Inside Information" to illustrate how the disclosure requirements work and what the compliance issues are

Q1 (b):     Do you agree that a listed corporation should be obliged to disclose to the public as soon as practicable any "inside information" that has come to its knowledge, and that it should be regarded to have knowledge of the inside information if a director or an officer has come into possession of that information in the course of the performance of his duties?

  1. The Council supports making it an obligation for a listed corporation to disclose to the public as soon as practicable any "inside information" that has come to its knowledge. The Council agrees to imputing a director or an officer's inside information to the listed corporation, and further is of the view that the scope should be broadened to cover any inside information whether it comes by in the course of the performance of his duties or not.

Q1 (c):     Do you agree with the proposal that the disclosure must be made in a manner that can provide for equal, timely and effective access by the public to the information disclosed?

  1. Since sensitive information can spark market response within a short time span, the Council agrees to the proposal that the disclosure must be made in a manner that can provide for equal, timely and effective access by the public to the information disclosed. The Council is of the view that corporations which are listed on more than one exchange be required to disclose any inside information to the investing public in Hong Kong at the same time as it makes disclosure to the other markets.
  2. In case of delay in disclosure, the Council considers that a listed corporation should be required to give full explanation for its failure to disclose the relevant information in time, and to disclose whether any of its director or officer has engaged in any dealing in any of the securities of the corporation during the period for which the disclosure has been late.

Safe Harbours

Q2 (b):     Do you agree that the Securities and Futures Commission (SFC) should be empowered to grant waivers, and to attach conditions thereto?

  1. The Council agrees that the SFC should be empowered to grant an exemption to waive disclosure of information in circumstances where making the disclosure would render listed corporations in breach of court orders or law. The Council also supports empowering SFC to impose conditions in relation to the exemption granted so that changing circumstances can be provided for.

CONCLUSION

  1. The Council welcomes the proposed statutory disclosure regime which would require listed corporations to make timely and fair disclosure of inside information to the investing public. It is nevertheless noted that in the SFC's draft "Guidelines on Disclosure of Inside Information", some of the disclosure requirements are only required to be made to the public "as soon as practicable". In the Council's opinion, it is important to have proper safeguards to prevent non-disclosure (e.g. keeping silent), selective disclosure (e.g. asymmetrical disclosure of identical/similar information in different jurisdictions), and late disclosure which are material to an investor's decision.