The tycoons are really angry. All except a few signed the open petition against extending the trade ban before results announcements. Never have they been so united. The question is, why now? There was a 10-month consultation and the conclusion was announced in late November. But the tycoons remained silent until days before the scheduled implementation. In the market circulates a hilarious story. I don't believe it but I find it necessary to tell our readers - just to demonstrate how the wealthiest in town have been misunderstood. Early last year, when the consultation began, markets here and abroad were still robust. Remember the forecasts by some tycoons that the Hang Seng Index would climb above 32,000 points? When one can make a fortune easily by putting money in stocks, commodities and the now-infamous accumulators, who would bother about peanuts to be gained from insider trading before a results announcement? But now that the market has turned south, the game is completely different. A windfall can no longer be had at the snap of the fingers. Tycoons are in fact deeply in debt - thanks to their heavy bets on accumulators. Where to find the money? Selling stakes is not an alternative because they are already very cheap. The cash sitting in listed entities is the place to go. A special dividend would not be difficult to get given sheepish independent directors. One way to maximise the cash is to get a credit line two months before the results announcement, increase one's holding in the firm, sit on it during the one-month pre-results trading ban, and then announce a special dividend together with the results. So the sceptic's tale goes. But the new rule bars directors (who in many cases are majority shareholders) from trading between the year-end and the results announcement. This period can be as long as four months for an annual report given that most companies do not release their results until the deadline. The financing cost for the loan increases significantly. The scheme no longer works and the tycoons are mad. It's hilarious, isn't it? The owners of our listed firms have always held the interests of minority shareholders in their hearts. As one tycoon explained, they did not respond earlier because the consultation was poorly conducted. The Hong Kong stock exchange should not have sent the firms the consultation document together with a cover letter summarising the key points and a clause by clause questionnaire of the tick-yes-or-no style. That's too much for our tycoons to digest. They are so occupied with their personal and company investments. Yes, they do have company secretaries and lawyers. But they are busy too. Knowing that more than 34 per cent of reported directors' trading falls within the extended trading ban period, the exchange should have realised the proposal would ruffle many feathers. To make sure the busy tycoons and their lieutenants understood its significance, the exchange should have prepared a separate consultation document detailing how it might hurt their pockets and organised briefing sessions. When they received the limited opposition, instead of feeling surprised - as an exchange source has said - and pressing ahead, the exchange officials should have called up the tycoons to make sure they understood the situation. Well, we can't cry over spilled milk. Now that the tycoons - the holders of major economic interests and votes in the Chief Executive election - have expressed their anger, what next? The exchange, which has all along insisted that the proposal originated in the Securities and Futures Commission, has successfully passed the buck to the commission and the government by refusing to back down. Given the political interests at stake, it's hard to imagine the government staying firm. After all, this will not be the first time. We've seen it with the plan to pass all regulatory authority to the SFC from the exchange. We've seen it with the plan of wealth assessment for old-age pensions. In three months' time, we are likely to see a mixture of the following: Shortening of the trade ban to 60 days before the results announcement. (That lies somewhere between the existing and the proposed limit. It is the practice in Britain, which makes it easy to argue.) Earlier implementation of the plan under which a firm should announce its annual results three months after its financial year ends instead of four. (The original schedule is 2010. The exchange and the SFC deserve some applause if we get this.) A promise to deploy more resources in the crackdown on insider trading. (That's the easiest part because the power of criminal prosecution has not been proven so far. Five years after the criminalisation of insider trading, the government had not pressed any charges until early last year. Six prosecutions have now been made. None of them has been heard by the court so far.) If that is the case, every party will be getting something. The episode will deal a blow to the prestige and integrity of our regulators. But who cares?
