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On 7 August 2020, The Stock Exchange of Hong Kong Limited (Exchange) published a consultation paper on proposed changes in respect of the Exchange’s disciplinary regime.
The proposals have a particular emphasis on strengthening the Exchange’s powers to hold accountable, and impose appropriate sanctions on, individuals responsible for misconduct and breaches of the Listing Rules.
Key proposals are summarised below:
Proposed enhancements to existing disciplinary sanctions and introduction of a new sanction
|Current sanctions||Proposed changes|
|Private reprimand||Enhance by enabling publication of the substance (without disclosing the identity of the parties)|
|Public statement involving criticism||
|Public statement that the retention of office by the director is prejudicial to the interests of investors (PII statement)||Enhance by:
The Exchange proposes to define the term “senior management” for disciplinary purposes to include:
|Introduction of a new sanction:
Public statement that in the Exchange’s opinion a director is unsuitable to occupy a position as director or within senior management of a named listed issuer or any of its subsidiaries, in the case of serious or repeated failure by a director to discharge his responsibilities under the Listing Rules (Director Unsuitability Statement)
|Suspension or cancellation of listing as follow-on action if individual subject to PII Statement remains in office of the specific issuer||Enhance by including denial of facilities of the market as follow-on action
It is also proposed that, after a PII Statement with follow-on actions has been made against an individual, the listed issuer identified in the statement must include a reference to the PII Statement in all of its announcements and corporate communications, unless and until that individual is no longer a director or senior management member of the relevant listed issuer.
The other listed issuers of which the individual is a director are required to announce the PII Statement as soon as practicable. Any other listed issuers which appoint the individual as a director are required to disclose in the appointment announcement that the director is subject to a PII Statement.
The above will also apply in respect of a Director Unsuitability Statement, but only against the listed issuer named in the statement.
|Denial of facilities of the market||Enhance by:
|Suspension or cancellation of listing||
|Rectification or remedial sanctions|
|Ancillary or operational sanctions|
|Ban on professional advisers||Enhance by extending the ban to cover representation of any or a specified party|
|Report the offender’s conduct to another regulatory authority||
|Take such other action asappropriate|
Relevant parties who may be subject to disciplinary actions
Proposed new parties
The Exchange proposes to expand the disciplinary regime to new parties, including:
Express obligations on professional advisers
The Exchange proposes to include the following express obligations on professional advisers when acting in connection with Listing Rule matters:
Additional circumstances where disciplinary sanctions can be imposed
Secondary liability for Listing Rule breaches
The Exchange proposes to introduce secondary liability for Listing Rule breaches in circumstances where the Exchange determines the person “has caused by action or omission or knowingly participated in a contravention of the Listing Rules”. These persons may include, among others, CFO, COO, company secretary, substantial shareholders and financial advisers.
Failure to comply with requirements imposed by the Listing Division, the Listing Committee or the Listing Review Committee
The Exchange proposes to include an explicit provision permitting the imposition of a sanction in circumstances where there has been a failure to comply with a requirement imposed by the Listing Division, the Listing Committee or the Listing Review Committee of the Exchange, and that sanctions may be imposed on all relevant parties through secondary liability where a party has failed to comply with a requirement imposed by the Listing Division, the Listing Committee or the Listing Review Committee.
Duty to provide accurate, complete and up-to-date information when responding to the Exchange’s enquiries or investigations
The Exchange proposes to explicitly provide in the Listing Rules the obligation to provide complete, accurate and up-to-date information when interacting with the Exchange in respect of its enquiries or investigations.
Consultation will end on 9 October 2020.
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