New listing regulations are the result of consultations that began in May following a spate of scandals Sponsors are facing tighter rules as regulators prepare to announce more new laws on Tuesday, according to Richard Williams, head of Hong Kong Exchanges and Clearing's listing unit. The new rules will make sponsors responsible for ensuring listing candidates have adequate internal controls and procedures in place by the time they go to market. The rule changes will also give the exchange discretionary powers to require companies to appoint compliance advisers to improve their internal control system. 'The exchange can exercise the power when the companies have seriously breached rules or their internal control systems have broken down,' he said, adding both measures would be effective from January 1. The two rules are part of a range of measures to be announced on Tuesday by the exchange and the Securities and Futures Commission at the conclusion of a consultation on regulation of sponsors. Amid a slew of corporate scandals that have put the spotlight on due diligence conducted by sponsors, the regulators unveiled a range of proposed changes to rules governing sponsors for consultation in May last year. Some measures were implemented on October 1, including a requirement for sponsors to sign a declaration on due diligence work on listed companies. Commenting on the recent rule requiring listed firms to increase the number of independent non-executive directors on their boards from two to three, Mr Williams said 95 per cent of main-board listed firms and 88 per cent of those listed on the Growth Enterprise Market had complied, leaving 110 firms that had yet to fall into step. 'We will review the circumstances of these companies to decide on what to do and whether there will be any disciplinary action,' he said. There will be a difference in response to those which intend to follow the regulation and those who choose to flout it. He said changes to corporate governance rules would be on the agenda at an SFC board meeting next week and would include a proposal for companies to voluntarily disclose their senior executives' remuneration packages. Also on the agenda will be a government proposal to add a chief executive role to the commission, according to SFC chairman Andrew Sheng, who declined to comment on talk that he may take up the new post. 'This is a reform in which I have personal interest so I cannot make any comment on it.' Market sources said the SFC planned to unveil watered-down proposals on conflict-of-interest issues for analysts. That would include dropping a proposal requiring newspaper commentators to use their real names. The proposal met harsh criticism from many market participants who said it would discourage analysts from writing columns and hence affect small investors who relied on the information therein. Mr Sheng said the SFC must tailor the regulations to fit all sectors.
