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Hong Kong Stock Exchange

Accountants add their voice to opposition against proposed listing reform

Accounting representatives say the reform plan would give SFC too much power

PUBLISHED : Tuesday, 26 July, 2016, 7:28pm
UPDATED : Tuesday, 26 July, 2016, 10:52pm

Veteran accountants have voiced their opposition to the proposed listing reform which they fear could damage Hong Kong’s appeal as a jurisdiction for initial public listings.

Clement Chan Kam-wing, managing director of assurance at BDO which is Hong Kong’s fifth largest accounting firm, said the proposed move would add to the influence of regulators in the listing process and reduce the number of new listings in Hong Kong.

“Look at Singapore where it allows the regulator to have great power to approve new listings... there are few IPOs,” Chan told the Post on Tuesday.

Chan added that he did not want to see the local market become “over-regulated”.

Chan’s remark came after The Chamber of Hong Kong Listed Companies vice-chairman Lo Ka-shui last Thursday said he strongly opposed the proposed listing reforms on the basis that it gives too much power to the Securities and Futures Commission and could move Hong Kong “backwards”.

The SFC and the HKEX last month jointly launched a three-month consultation to collect market views on changing the listing process. As part of the proposals, it will set up a listing regulatory committee and a listing policy committee, with equal representation from the SFC and HKEX.

The regulatory committee will handle applications deemed complicated by the exchange’s listing division. The other panel will decide on policies. Both committees will require a majority vote in making any decisions.

“Look at the real estate investment trust market which is solely regulated by the SFC. It is dead. Governance rules will become overly tight,” Lo said.

Chan said he believes the proposed listing reform would grant the SFC too much power to set rules and approve complicated listing applications.

“It is a worry that if the SFC increases its influence in the listing policies setting process and the listing approval process, it would put more focus on regulation and put too little emphasis on commercial value of the new listings,” Chan said.

He said the SFC may reject some new listings, killing off the opportunity for these companies to raise funds in Hong Kong.

“If that happens, the result is clear that these companies may simply go overseas to list. Hong Kong would lose out,” Chan said.

He added that Hong Kong needed to find the right balance between regulation and market development.

“The existing structure is good and should be preserved as Hong Kong has been the No 1 IPO market worldwide last year and in the first half of this year. If the SFC wants to improve market quality, it should strengthen enforcement to catch those who manipulate shares,” Chan said.

Another veteran accountant, Patrick Rozario, managing director of Moore Stephens Advisory Services, also opposed the reform plan.

“The listing approval process should remain in the hands of the HKEX and market participants as they know the commercial value of the listed companies,” Rozario said.

“The SFC always has a role to play as it is the ultimate regulator with the power to veto any decision by the HKEX. If the SFC steps into the listing approval process too much, it would confuse the roles between the HKEX and the SFC,” he said.