Chapter 13 the hk ex and listed companies

Chapter 13
The HKEx and
Listed Companies
The Presentation Slides for Teaching
Financial Regulations and Compliance Practices
Website : https://sites.google.com/site/quanrisk
E-mail : quanrisk@gmail.com
Copyright © 2019 CapitaLogic Limited

Declaration
 Copyright © 2019 CapitaLogic Limited.
 All rights reserved. No part of this presentation file may be
reproduced, in any form or by any means, without written
permission from CapitaLogic Limited.
 Authored by Dr. LAM Yat-fai (林日辉),
Director, CapitaLogic Limited,
Adjunct Professor of Finance, City University of Hong Kong,
Doctor of Business Administration,
CFA, CAIA, CAMS, FRM, PRM.
Copyright © 2019 CapitaLogic Limited 2

Outline
 The HKEx Group
 Listed companies

Hong Kong Exchanges
and Clearing Limited (HKEx)
Hong Kong Exchanges
and Clearing Limited
(HKEx)
The Stock Exchange
of Hong Kong Limited
(SEHK)
Hong Kong Futures
Exchange Limited
(HKFE)
The SEHK Options
Clearing House Limited
(SEOCH)
HKFE Clearing
Corporation Limited
(HKCC)
London Metal Exchange
Hong Kong Securities
Clearing Company Limited
(HKSCC)

Major functions of the HKEx
 Facilitate stock trading on a transparent platform
 Provide clearing and settlement services
 Provide automated trading services
 Frontline regulator of listed companies
 Listing Department
 in accordance with the Listing Rules
 over 1,000 pages per listing board

HKEx statistics

HKEx on 28 Sep 2018

Top 10 stock exchanges

A model listed companies
regulatory framework
Listing Rules
HKEx
Listing Policy Supervision
Listing
Committee
Enforcement
The Chamber
of Hong Kong
Listed Companies

Listing Department
 Supervise the listing process
 Monitor corporate compliance of listed
companies under the Listing Rules
 Ensure those rules reflect best international
practices

Organization chart of
the Listing DepartmentListingDepartment
IPO Advisory and Projects
IPO Vetting
Policy and Secretariat Services & Support
Accounting Affairs
Primary Market Information
Listed Issuer Regulation
Listing Enforcement
Structured Products and Fixed Income

IPO Advisory and Projects
 IPO Advisory and Projects is responsible for
leading and managing all IPO-related strategic
projects
 In addition, it is the main contact point for pre-
IPO enquiries relating to new equity listings

IPO Vetting
 IPO Vetting is responsible for processing
applications for new equity listings including
transactions by listed companies deemed to be
new listings, issuance of guidance, formulation
of IPO policies and vetting prospectuses
 In addition, it assists IPO Advisory and
Projects in processing pre-IPO enquiries

Policy and Secretariat Services
& Support
 Policy and Secretariat Services & Support is responsible for
implementing the policy agenda set by the Listing Committee,
coordinating policy initiatives and developments, and taking the
lead on policy matters affecting listing applicants, listed companies
and the operation of listing
 It is also responsible for providing secretariat support to the Listing
Committee, Listing (Review) Committee, Listing (Disciplinary)
Committee and Listing Appeals Committee
 In addition, it assists with listing's regular and ad-hoc reporting
obligations, provides research support and data analysis, formulates
and monitors listing's annual budget, contingency arrangements and
also monitors the implementation of the HKEx's administrative,
policy and support initiatives

Accounting Affairs
 Accounting Affairs is responsible for all matters relating to accounting and
auditing, including
 developing and formulating overall strategy and policies on accounting and
financial related disclosures for listed companies and listing applicants
 liaising and coordinating with the HKICPA and international accounting and
auditing standard-setting bodies to influence the direction and development of
accounting and auditing standards
 recommending and implementing amendments to the Listing Rules in line with
latest accounting and financial disclosure developments and international best
practices
 maintaining a financial statements review programme to ensure a high standard
of financial disclosure by listed companies
 liaising with, and to make referrals to other regulatory bodies, on suspected
significant accounting and auditing irregularities identified in the financial
statements of listed companies
 providing advisory services internally on accounting and auditing matters

Primary Market Information
 Primary Market Information is responsible for
managing and enhancing the operations of
Electronic Disclosures for listed company
disclosure filings
 It also administers trading arrangements
stemming from listed companies' corporate
actions
 In addition, it is responsible for handling the
operations of Disclosure of Interests filings as
required by the SFC

Listed Issuer Regulation
 Listed Issuer Regulation is responsible for ensuring a fair,
orderly and efficient market for the trading of securities
 It monitors listed companies' compliance with the
continuing obligations of the Listing Rules including
continuous disclosures by listed companies and their
corporate governance practices, and processes their
applications for listing of further equity issues
 Listed Issuer Regulation also handles cancellations of
listings, public complaints against listed companies and
enquiries and requests for clarification of the application of
the Listing Rules by listed companies and market
practitioners

Listing Enforcement
 Listing Enforcement is responsible for
investigating possible breaches of the Listing
Rules, initiating and conducting disciplinary
proceedings before the Listing (Disciplinary)
Committee, issuing caution and warning letters
as well as handling complaints alleging
breaches of the Listing Rules

Structured Products and Fixed Income
 Structured Products and Fixed Income is
responsible for processing listing applications
of structured products and debt, monitoring
post-listing compliance, handling complaints
and investor education
 It seeks to develop policy initiatives and
enhance regulations to raise industry standard
for the development of structured products and
fixed income markets

Policy framework
 Listing Rules
 Frequently asked questions
 Listing decisions
 Interpretative letters
 Guidance Letters
http://www.hkex.com.hk/Listing/Rules-and-
Guidance/Interpretation-and-Guidance?sc_lang=en

Supervision framework
 Main Board submission forms
Guidance/Forms/Main-Board-Issuers?sc_lang=en
 GEM Board submission forms
Guidance/Forms/GEM-Issuers?sc_lang=en

Investigation statistics

Disciplinary action
 Private sanction
 Public sanction
 Settlement fee
 Direct listed companies to appoint compliance advisers for advice
on future Listing Rules compliance matters or for carrying out
internal control reviews
 Require directors to undergo training on Listing Rules compliance
matters and directors’ duties
 Make referrals to other regulators and/or law enforcement agencies
for conduct which falls within their jurisdiction
 Direct a trading suspension
 Cancel the listing of the listed company

Outline
 The HKEx Group
 Listed companies

Listed company
 Listing
 To put a limited company's shares on a stock
exchange
 To facilitate trading of the shares by general public
under an efficient and transparent platform
 Listed company
 A limited company with its stock shares traded
publicly on a stock exchange

Why listing?
 Primary reasons
 A limited company looks for capital to fund its development
 Shareholders realize part of their investment in a limited
company
 Further reasons
 To improve corporate governance as a result of stringent listing
requirements which help improve management efficiency and
information flow
 To increase corporate transparency and gain recognition from
institutional investors
 To improve company profile which may result in increased
businesses, greater assurance among customers and suppliers

Advantages of listing in Hong Kong
 Well established legal system
 International accounting standards
 Sound regulatory framework
 Advanced trading, clearing and settlement infrastructure
 Free flow of capital
 The first choice for mainland Chinese companies to list in
international market
 The first choice for international investors to invest in
mainland Chinese companies

Main Board
 For well established businesses that fulfill the
profit, financial and operational requirements
 Range from conglomerates, banks, property
developers to utilities
 Targeting all investors
 Primary listing: Companies incorporated in Hong
Kong, China, Bermuda or Cayman Island
 Secondary listing: Companies incorporated in
Hong Kong, China, Bermuda, Cayman Island or
other major countries

Growth Enterprise Market
(GEM) Board
 For those companies that cannot or have yet to
fulfill the Main Board listing requirements
 Targeting institutional and knowledgeable
investors
 Primary listing: Companies incorporated in
Hong Kong, China, Bermuda or Cayman
Island
 A stepping stone towards the Main Board

Reference
 HKEx, 2013. Listing in Hong Kong – A
quality market.

Chapter 13 the hk ex and listed companies

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