Two former Hong Kong financial heads take the side of SFC in company listing reform debate
Two former financial heavyweights have added their voice to the turf war between Hong Kong’s two financial market regulators over public company listing reforms.
Hong Kong Securities Futures Commission founding chairman Robert Owen and former financial minister Frederick Ma both support proposed listing reforms that would boost the influence of the SFC in listing matters, while the plans are strongly opposed by others including a Hong Kong Exchanges and Clearing director.
Owen, who was chairman of the SFC from its establishment in 1989 until 1992, the period when the basic structure of the city’s public listing regime was established, said he believes the reform plans are steps in the right direction.
“Circumstances back then were very different from how they are now,” he said. In 2008 Owen was also adviser to the HKEX during a review on how to improve the process of listing new companies in Hong Kong.
The controversial consultation jointly announced by the SFC and the HKEX suggests the establishment of a listing regulatory committee and a listing policy committee, with equal representation from both regulators, effectively involving the SFC in the listing process at an earlier stage. At present, HKEX and a listing committee approve new listings and set policies, while the SFC grants approval in the final stage.
But there is strong opposition, with HKEX director Vincent Lee saying the proposals were prepared by exchange staff and did not have board approval. Lee said he was totally opposed to the reforms, a view echoed by Chamber of Hong Kong Listed Companies vice-chairman Lo Ka-shui last month when he publicly slammed the plan as one that could result in over-regulation and “may kill off the IPO market”.
SFC chief executive Ashley Alder on Thursday publicly rejected such concerns, saying the criticism was “based on a flawed understanding of the proposals”.
Owen added: “It is a sensible move to separate listing policy formation from the decision-making process on individual cases, by having these handled by separate committees. This would make the structure clearer and more efficient.”
Owen, who is now based in the UK, told the South China Morning Post in a telephone interview that a problem with the current listing structure was that it does not provide an effective reporting line for the listing division.
At present, all listing applications are handled by the listing division of the HKEX for first approval, then submitted to the 28-member listing committee which is under the structure of the HKEX but is made up of independent professionals such as lawyers, accountants, fund managers and listed companies representatives.
‘The listing division presently reports to the listing committee which consists of people with market experience but they are part timers and cannot exercise effective oversight of the division,” Owen said. “The current proposals would be an improvement by transferring the role of overseeing the listing division to a more appropriate body in the form of the proposed new listing policy committee. The proposals should generally improve coordination between the SFC and the Listing Committee and Listing Division”.
Owen also supported allowing the HKEX board to have more involvement in setting listing policy.
“The board contains many senior people with valuable market experience and they should be trusted to represent the interests of Hong Kong as a whole. It is appropriate for the current reform to retain HKEX as the frontline regulator of listed companies,” he said.
Former Secretary for Financial Services and the Treasury Frederick Ma Si-hang, who is now chairman of MTR Corp, believes the reform plan could enhance communication between HKEX and SFC.
“The current proposals do not suggest a change in the front-line regulatory role of HKEX but only adds the two new committees to increase communication channels,” Ma told the Post in an interview. “It would be much better for the SFC to be able to express its opinions at an early stage on listing policy setting and on some complicated listing applications. This would be better than the current structure where the SFC could veto the listing related decision at the final stage,” Ma said.
Benny Mau, chairman of Hong Kong Securities Association, said from the investor protection point of view, he supports the reform. “What is important is for the HKEX and SFC to work together to check on the quality of a company before and after their listings in a bid to protect investors’ interest,” he said.