Hong Kong yesterday announced plans to introduce laws that ensure listed firms disclose price-sensitive information early, with those who fail to do so being fined up to US$1 million.
The proposal was put forward to avoid a repeat of the Citic Pacific (中信泰富) scandal, when the Hong Kong-listed conglomerate revealed in 2008 that it faced a HK$18.6 billion (US$2.40 billion) loss from rogue currency bets.
The Beijing-backed company said it kept the information secret for weeks to unwind the trades, a decision that drew public outrage and regulatory attention to how city’s listed companies disclose information. The government recommended a range of civil actions against companies and directors who breach the laws, including a fine of up to HK$8 million.
However, the proposal fell short of calls to make a breach of the disclosure rules a criminal offense.
Chan Ka-keung (陳家強), the city’s secretary for financial services and the treasury, said the proposed regime would strength Hong Kong’s status as a financial hub.
“It would help demonstrate to the market our commitment to enhancing market transparency and quality, thereby enhancing Hong Kong’s position as an international financial center and the premier capital formation centre in the region,” Chan said.
Under the proposal, the Securities and Futures Commission, Hong Kong’s financial watchdog, would be given the power to investigate any suspected breach, Chan said. The Market Misconduct Tribunal, which currently deals with insider dealing cases, would have its jurisdiction extended to cover breaches of the proposed laws.
Apart from fines, the director or officer in breach of the laws could be disqualified from office, or be deprived of access to market facilities, for up to five years.
Hong Kong’s disclosure practice is currently regulated by non-statutory listing rules administrated by the Hong Kong Stock Exchange. The Exchange does not have any investigatory power and can only resort to disciplinary actions such as private reprimand and public censure in the case of a breach of the rules.
Hong Kong stocks closed up 0.88 percent yesterday. The benchmark Hang Seng Index gained 184.32 points to 21,237.43.
China said on Friday it would launch long-awaited stock index futures on April 16, in a bid to provide more sophisticated investment options for investors.
The index futures will reference the CSI 300 Index, which comprises 300 yuan-denominated A shares listed on the Shanghai and Shenzhen stock exchanges.
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