Stock exchange council members have rejected Pearl Oriental Holdings' legal challenge to the exchange's application procedures. Pearl Securities, an arm of property investor Pearl Oriental Holdings, this week declared the exchange's articles of association and membership rules 'unlawful, void and of no effect' and 'non-transparent, unfair and outdated'. The company is seeking to quash a May 5 decision rejecting its membership application and is demanding the exchange council give its application a new hearing. Pearl pointed out that, according to stock exchange rules, only four votes were needed to reject an application. Pearl Securities had 22 votes of support. A stock exchange council member said: 'If an applicant does not like the rules, it can choose not to apply to join the exchange. 'I don't think Pearl Securities would say the rules are outdated or unlawful if its application was approved.' The run of small broker collapses had sparked concern, and the exchange was being extremely careful approving new applicants, he said. Pearl Securities' application was the first to be rejected by the exchange council since it was set up in 1986. Market sources speculated the rejection was related to an ongoing Securities and Futures Commission investigation into trading in Pearl Oriental shares. Pearl pointed out that the exchange's membership committee and SFC had approved its application. One council member said the council considered different factors from those used by the SFC and membership committee. The other two had only to look at the financial status and management experience of the firm. 'I think all applicants must understand that the exchange council is not a rubber stamp and that we would not follow exactly the SFC's and membership committee's opinion,' he said.