Once again we have occasion to raise grave questions about whether the stock exchange treats breaches of its own rules seriously enough to be allowed to regulate itself.
The case involves a connected party transaction in the Mansion House Group, a HK$100 million loan that amounted to about 71 per cent of the company's net tangible assets and that caused the company to report a loss for 1998 when the loan went wrong.
The exchange may have dealt in the past with cases that involved greater amounts of money but Mansion House is a small company and the impact on its shareholders of this breach of trust by their directors was enormous.
Yet all that the exchange has imposed as punitive measures is the publication of a notice of censure. There were no fines, no restrictions on further dealings, the company continued to do business throughout, no directors were told that they were banned from holding directorships in the future and the case was not referred to police or other authorities for possible further action.
It makes a mockery of all the talk we have heard recently about bringing better corporate governance to the SAR. What is the point of making righteous noises in public about the standards expected of directors when a flagrant proven breach of those standards has resulted in what can hardly even be termed a rap across the knuckles?
Here we are making a great fuss about the Medical Council because it refuses to ban doctors from using mobile phones during operations when doctors have at least occasional reason for doing so. We even have legislators now forming a sub-committee to review the mechanisms for medical complaints.
But where is the legislative sub-committee that has now been appointed to review whether the stock exchange is a fit and proper entity to regulate itself? As a case of a public entity that is too much of a soft touch in disciplining its members it easily outranks the Medical Council.