Quarterly reporting plan worsening split among members The Hong Kong stock exchange's listing committee is set to have a heated debate today on two controversial proposals - quarterly reporting and a trading blackout period for company directors - as opinions remain sharply divided, sources said. A South China Morning Post poll of some of the 28 committee members on a call last month by Hong Kong Exchanges and Clearing chief executive Paul Chow Man-yiu to consult the market on the proposals shows the committee split down the middle. 'It is likely to be a 50-50 split between supporters and opponents of Mr Chow's suggestion,' one source said. 'Some fund managers and institutional investors want to push ahead with an extension of the blackout period and the introduction of quarterly reporting without further consultations, but others said they should consider the market's views. 'There is going to be a prolonged debate,' the source said. As today is the listing committee's only scheduled policy meeting before the blackout period takes effect on April 1, it is very likely to come up with a decision. The proposal, which the exchange believes can crack down on insider trading, has sparked opposition from more than 200 listed firms including Cheung Kong (Holdings), Swire Pacific and Li & Fung, which said the period was too long and could discourage listings on the city's bourse and reduce trading volume. The Securities and Futures Commission last year approved the new blackout period but its implementation has been delayed from January 1 originally amid strong opposition. The new blackout period rule bans directors and key shareholders from trading their companies' shares from the close of books until the results announcements. Should companies report earnings at the end of the four-month deadline for annual results and three months after for interim earnings, the period will be seven months a year, compared with two months now. The exchange has turned down requests for a new round of consultations, but in a sign of compromise, listing committee head Richard Williams said on January 13 the committee might review the rule if Hong Kong introduced quarterly reporting to raise transparency. Firms now report results every six months. On the same day, Mr Chow sent a letter to all listing committee members urging them to review the quarterly reporting and blackout period together at the policy meeting today. A regulatory source said the SFC had also written to the committee members, asking them to consider market concerns. A spokesman for the SFC refused to confirm if it had sent such a letter to the committee but said: 'We believe it is appropriate for the listing committee to consider the concerns and views raised by the market. 'We do not want to preempt the outcome of the listing committee meeting.' Secretary for Financial Services and the Treasury Chan Ka-keung said he supported Mr Chow's suggestion to consult the market. 'Many listed company directors voiced their concerns very late. But still, we should listen to these concerns,' Mr Chan said. His views were shared by some committee members who said this could be a good chance to push listed firms to accept quarterly reporting. 'Hong Kong is among the few markets which have not yet had any form of quarterly reporting. If we make it clear that the new blackout period would only be shortened if Hong Kong adopts quarterly reporting, it will help to press the listed companies to accept quarterly reporting,' said one member. But some committee members who represent institutional investors said there was no need for more consultations, believing there would be no further delay to the April 1 implementation date for the blackout period as the proposals had already undergone public consultation. Their views are echoed by former HKEx director and shareholder activist David Webb, who said once mandatory quarterly reporting was introduced, the listing committee could consider whether the blackout rule needed amendment. 'Most of the opponents of the blackout rule are openly opposed to quarterly reporting anyway and are just looking to delay both issues for another year. We have already had two consultations on quarterly reporting, in 2002 and 2008, and there is no need for a third,' Mr Webb said. 'The investing public clearly supports mandatory quarterly reporting and other markets, including the mainland, have required it for many years already. Hong Kong is getting left behind.' Edward Chow Kwong-fai, the deputy chairman of the Business and Professionals Federation, supported mandatory quarterly reporting but believed there should be another consultation on the proposal. 'Directors, substantial shareholders and listed companies are essential pillars supporting the financial market and their views should be given due weight along with other considerations such as investor protection,' he said. 'Quarterly reports are desirable and more companies have adopted them voluntarily. What needs to be considered is the contents of a quarterly report.'