The Securities and Futures Commission has shelved a plan to force major shareholders and financial firms to disclose immediately when pledged shares are sold, according to a paper given to legislators.
'In view of the lack of consensus on resolving this issue among the various interest groups ... no fundamental changes are being proposed at this stage', although more discussion was planned, the securities watchdog said in the paper. An SFC consultation launched in January proposed to enhance disclosure of share pledge activities by major shareholders following sharp price drops in three companies last year amid market rumours that substantial shareholders had defaulted on margin calls.
In September last year, South Sea Petroleum Holdings' stock plunged 95 per cent in 20 minutes after shares pledged by the chairman as collateral were sold. Shares of filmmaker B&S Entertainment Holdings and Far East Pharmaceutical Technology suffered a similar fate earlier in the year.
Small shareholders were not informed of the share pledges until after disposal and the SFC was urged to implement disclosure immediately after shares are pledged.
The SFC merely proposed that major shareholders and lenders notify the stock exchange and listed company of disposals immediately, instead of waiting the three days allowed by current rules.
During the six-week consultation, brokers and legislator Chim Pui-chung attacked the SFC proposal as not going far enough to protect shareholders, while bankers and other parties opposed changes to the current system.