Overpaid box tickers at SFC leave us none the wiser about price-sensitive information
"The newsletter also reminds listing sponsors to look critically at what constitutes meaningful disclosures and not take a mechanical box-ticking approach."
SFC release, July 9
Ask and you shall receive. The Bible says so, the Securities and Futures Commission complied and the prophecy was fulfilled beyond expectation.
It happened when the SFC introduced a new rule last year requiring listed companies to publish all price-sensitive information or face the consequences.
What is price-sensitive information?
Well, that would be information to which the share price might be sensitive. Alternatively you might consider it a sensitivity of the share price to information. Then again you might think of it as a share price information sensitivity nexus.
Don't laugh. The SFC has never done any better in defining it, which leaves the corporate executive in a quandary. Get it wrong and he could find himself in front of an SFC Market Misconduct Tribunal, where the definition will be whatever SFC regulators choose it to be at the time.
SFC regulators, you must understand, are mostly lawyers who have no hands-on experience of financial markets. You can only firmly rely on them to say whatever advances the social standing and reputation of regulators.
So the corporate executive goes for advice to his own lawyer, who takes the cautious approach that all lawyers take in such circumstances. "Give them everything," he says. "If you have to ask, the answer is 'yes'."
And then the stock exchange gets snowed under with corporate announcements that no one reads because there is not time enough in the day to read them and rarely anything of value to be gleaned. This means that news of real importance is also easily missed, a fine example of one step forward, two steps back.
Bureaucracies deal in tick boxes. They process paper and if they have to deal with questions of judgment they simply work up another sheet of paper with boxes to tick. If the SFC cannot work up a tick box sheet on the meaning of "price sensitive" then it should not bother at all.
But let's look at regulatory matters from another angle as well. The SFC's recently published annual report reveals that pay has risen to an average of almost HK$1.2 million a year per employee. That's for 753 employees, itself a number that has risen 50 per cent over the last four years alone.
Not bad, eh? Find me any company with a payroll of 753 people paid an average of HK$1.2 million each a year. No wonder that, despite exacting a levy on the stock exchange of more than HK$1 billion in the year to March, it still ran a deficit of HK$138.6 million.
The two charts put the story into further perspective. Not only twice the average pay of professionals in Hong Kong, and most of its employees don't even rate as professionals, but this has also risen twice as fast as the nominal wage and salary indices over the last 10 years.
Do you see that line with the words "out of control", Mr Alder? You tick the box marked 'Yes'.