Turf war over Hong Kong’s stock market regulation: watchdog chief attacks critics of reform

Chief executive of market watchdog dismisses claims that his agency will be given more power and warns that public could be ‘misinformed’

PUBLISHED : Thursday, 04 August, 2016, 11:33pm
UPDATED : Friday, 05 August, 2016, 8:21am

The turf war between the city’s two market regulators took ­another turn for the worse on Thursday as the head of the Securities and Futures Commission hit back at Hong Kong Exchanges and Clearing in a rare public rebuttal over contentious listing reform proposals.

SFC chief executive Ashley Alder rejected criticism of the proposals – which would give his agency greater power in the listing process – by stock market regulator HKEX, accountants and listed companies, warning that their ­objections could leave the public “misinformed”.

Hong Kong’s SFC set to issue bank-like liquidity guidelines for funds

In an unusual move for the SFC to comment during an on-going consultation, Alder said the regulator needed to clarify matters as some recent commentary seemed to be “based on a flawed understanding of the proposals”.

The divide between the two regulators became evident after they jointly announced a three-month consultation to revamp the listing process.

The plan is to establish a listing regulatory committee and a listing policy committee, with equal representation from both regulators, effectively involving the SFC in the listing process at an earlier stage. At present, HKEX and a committee approve new listings and set policies, while the SFC grants approval in the final stage.

But there is strong opposition, with HKEX director Vincent Lee saying the proposals were ­prepared by exchange staff and did not have board approval. Lee said he was totally opposed to the reforms, which might grant the SFC power to kill off some listing applications in the early stage.

HKEX, SFC propose overhaul of stock market listing regime

Chamber of Hong Kong Listed Companies vice-chairman Lo ­Ka-shui last month publicly slammed the plan as giving too much power to the SFC that might lead to over-regulation and “may kill off the IPO market”.

Alder rejected such concerns, saying the SFC would get no new powers as it already had the ­authority to reject new listings or listing policies.

“The reforms are aimed at ­creating an efficient, focused and publicly accountable one-stop shop to quickly get on top of and pursue complex listing policy ­options to set the right conditions for a flourishing, competitive and healthy market,” he said.

Alder said the two new committees with smaller memberships – one will have six members and the other eight – could work more effectively to resolve ­complex listing matters. He therefore rejected suggestions by Lee and Lo that the SFC send some members to join the 28-member listing committee to add its voice.

He said the proposals would eliminate regulatory “ping pong” between the authorities to make quicker and more accountable decisions.

Alder noted that according to past experience, only about 10 per cent of all listing applications under the proposed reforms would be handled by the newly set-up listing regulatory committee. The remaining 90 per cent, which were simple and normal cases, would continue to be handled by the listing committee.

He also had reservations about suggestions that Hong Kong should widen the door to allow more new listings and let the SFC handle enforcement in problematic cases. “Enforcement is an SFC priority. But no enforcement system in the world is able to right all wrongs and compensate for all investor losses,” he said.

“This is particularly relevant in a market with a high level of direct retail participation.”

Mike Wong, chief executive of the Chamber of Hong Kong ­Listed Companies, said he could not understand why the SFC was being so vocal during the ­consultation.