Improvements urged on disclosure quality
The chairman of the securities regulator hopes Hong Kong-listed companies will disclose more relevant details in their corporate announcements more promptly, so as to match the best international practices.
Carlson Tong Ka-shing, chairman of the Securities and Futures Commission, said listed companies needed to make more of an effort to disclose meaningful price-sensitive information, although they had improved a lot after a new disclosure law took effect on January 1.
"We have seen an 87 per cent year-on-year increase in announcements of corporate inside information in January, which showed the new law has led companies to pay more attention to public disclosure," Tong told the South China Morning Post.
The number of companies providing key corporate information rose to 401 last month from 214 a year earlier.
Under the new law, companies and directors could face fines of up to HK$8 million if key price-sensitive corporate information, such as major acquisition or disposal plans, mergers, acquisitions or substantial changes in profit or loss, is not disclosed in a timely fashion.
The passing of the law, which is designed to put market transparency in Hong Kong on par with international standards, followed more than 10 years of debate. Prior to its introduction, companies that failed to disclose such information would only be reprimanded for breaching listing rules. The fines were brought in to add teeth to the existing regulations.
But Tong said the quality of the disclosures could still be improved. "Many disclosure announcements only give very brief information, which is not detailed enough to allow investors to make investment decisions."
He said the timing could also improve. At present, some companies make an announcement only after a significant movement in their share prices. "This would suggest the deals or sensitive corporate news may have already been leaked before an announcement is made," he said. "Companies should announce the price-sensitive information before it has been leaked.
"Many overseas markets have a better disclosure culture, and companies release news of any important mergers, acquisitions or new ventures to the public immediately."
Hong Kong Institute of Directors chairman Kelvin Wong Tin-yau shared this view.
"If a company is issuing an announcement with incomplete information, it is going to create more confusion for investors," he said. "All the listed companies have the duty to make sure the announcements they issue carry sufficient information to allow investors to make appropriate investment decisions."