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SFC adopts Principles of Responsible Ownership

On 7 March 2016 the SFC published its consultation conclusions on the Principles of Responsible Ownership (Principles) which aim to provide guidance on how investors should fulfil their ownership responsibilities in relation to investments in Hong Kong listed companies.

The Principles encourage investors to establish policies, in particular voting policies, and to monitor and engage with Hong Kong listed companies in which they invest.

The Principles are voluntary and are intended to apply to persons who invest money, or hold shares, on behalf of clients and other stakeholders. They are not intended to apply to persons investing for their own account. Investors who hold or receive funds from the public that are invested in shares of Hong Kong listed companies are encouraged to adopt the Principles and disclose to their stakeholders in accordance with the Principles.

Investors who do not think that the Principles are relevant or suitable for them are encouraged to explain to their stakeholders why the Principles have not been adopted at the outset and, if applicable, explain what alternative measures they have in place.

The Principles aim to strengthen the corporate governance culture in Hong Kong, on the basis that effective engagement by investors generally leads to better-run companies.

Whilst they are in general aimed at investors of Hong Kong listed companies, investors based in Hong Kong are encouraged to observe similar principles in relation to their foreign investments. Similarly, foreign investors are encouraged to observe the Principles for their investments in Hong Kong listed companies as the Principles’ success lies in all investors playing their part.

The SFC has stated that they will not monitor the adoption and application of the Principles at this stage but that they will monitor the Principles’ reception and development to determine whether any amendments may be necessary or whether they should be made compulsory at a future stage.

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