As an investor, you need complete and accurate information about companies to make well-informed investment decisions. It is important to have statutory rules that crack down on persons who lie to or mislead the public in company prospectuses or announcements.
What was the previous regulatory regime for corporate information disclosure?
The previous regulatory framework for corporate information disclosure was largely based on the non-statutory Listing Rules of the Stock Exchange and the listing agreement between a listed company and the Exchange which provided the Exchange with a limited range of sanctions against companies that had broken the rules. However, many believe that some kind of statutory support for the disclosure regime for listing applicants and listed companies is necessary.
What is the new regime under the SFO?
The introduction of the "dual filing" system establishes the SFC as the statutory regulator of corporate disclosure. Listing applicants and listed companies are required to file their disclosure and listing application materials, not only with the Exchange, but also with the SFC as a statutory filing.
To facilitate compliance and avoid additional costs, companies and applicants can just file the listing application and disclosure materials with the Exchange, provided that they have pre-authorised the Exchange to forward the documents to the SFC. The vetting of the listing application by the SFC will not cause any delay to the process as it will run concurrently with Exchange's consideration of the listing application under its own rules. Public disclosure made by a listed company will not be subject to pre-vetting by the SFC and therefore there will be no delay in disseminating the information.
These changes to the existing filing arrangements will assist us in using our investigatory powers and where appropriate, to prosecute those who intentionally or recklessly provide false or misleading information.
What are the respective roles of the SFC and the Exchange?
These are set out in the Memorandum of Understanding Governing Listing Matters between the SFC and the Stock Exchange.
The Exchange remains the frontline regulator of all listing-related matters. It is the primary point of contact for listing applicants and listed companies, and continues to be solely responsible for pre-vetting the disclosure materials.
The SFC can exercise its investigatory and prosecution powers against persons filing false or misleading information. The SFC is also able to comment on the draft listing documents and related disclosure materials and may require further information to be supplied. If the information provided in these documents is insufficient or misleading, the SFC has a reserve power to object to the company's listing application.
How about handling of complaints against listed companies?
To avoid administrative duplication and facilitate communications with the public, the Exchange, as the frontline regulator of all listing-related matters, has primary responsibility for handling any complaint of suspected misconduct that involves issues in respect of the Listing Rules. You should first approach the Exchange to make a complaint against a listed company, except in relation to takeovers and mergers which are governed by codes administered by the SFC.