SECURITIES REGULATION
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SFC

SFC

SFC to review GEM listing policies, consider brokers calls to allow order taking over social media

The SFC says its review will look at concerns involving the GEM board, and calls to enable order taking over social media

PUBLISHED : Thursday, 19 November, 2015, 7:54pm
UPDATED : Thursday, 19 November, 2015, 8:10pm

The Securities and Futures Commission will review policies to address problematic new listings in the Growth Enterprise Market in addition to assessing calls for more widespread access to social media as a tool for communicating with clients, according to chairman Carlson Tong Ka-shing.

“The SFC is working closely with the stock exchange to review the listing policies to address concerns by market participants about the many backdoor listings, reverse takeovers and volatile trading of the new listings, particularly on the second board Growth Enterprise Market in the past one year,” Tong said.

Many newly-listed GEM companies saw their shares undergo volatile trade after their debuts.

“We will address all these concerns and may consider tightening rules over this issue. We will have a public consultation before any rule change for both the main board and the GEM, in a bid to uplift the quality of the new listings of the market,” he said.

Tong said the review will also look into overall role of the GEM. Launched in 1999 as a Nasdaq-style market geared to high-growth companies, the board has about 200 listed companies listed, compared with over 1,500 on the main board.

In order to qualify for a GEM listing, a company is not required to have a profit, whereas to qualify for a main board listing, companies are require to show a HK$50 million profit in the three years leading to the listing.

Christopher Cheung Wah-fung, a broker and lawmaker of the financial services sector, supports the drive by the SFC to introduce new rules that would help protect the interests of small investors on the GEM board.

“However, we would also like to urge the SFC not to overregulate,” Cheung said.

Cheung and other local brokers have also lobbied the SFC in recent months to remove a ban on the use Whatsapp and Facebook.

Tong said yesterday at a media briefing thar the commission would consider brokers calls to remove the ban if brokers can find a way to prove client identity.

“The SFC is opened minded to new technology. The commission does not allow Whatapp trading as we are concerned on how the stockbrokers can confirm it is their clients who are using the messaging system to give buy or sell orders,” Tong said.

“If the brokerage firm can work out a system to verify their clients [identity]... the SFC is open minded to allow them to use these new technologies.”

Tong also said the SFC has worked closely with the China Securities Regulatory Commission on the cross border surveillance of the stock connect between Hong Kong and Shanghai.

Separately, Tong said the SFC will also announce the first batch of the mainland mutual funds to be sold in Hong Kong by the end of this year, as part of the mutual recognition to allow cross border fund sales.

“The SFC will also support brokers calls to urge the stock exchange to introduce a mutual fund trading platform for brokers to trade funds for clients. This will expand the distribution network of funds as now over 90 per cent of funds are sold through banks. Letting the stock brokers to trade mutual funds on the stock exchange would benefit investors by giving them more choice,” Tong said.

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