Listing regime, corporate disclosure and inside information
Domain 7 tests how companies list, what must be disclosed, and who enforces it - SEHK, the SFC, or the courts.
Who regulates listing
SEHK administers the Main Board and GEM Listing Rules as front-line regulator, but the SFC has statutory backing: it approves listing rules, may object to a listing application, and, under the dual filing regime, treats listing documents as filed with it. The Takeovers Code is administered by the SFC through the Takeovers Panel. The SFC's Corporate Finance Division handles listing-related policy.
Admission tests
Main Board applicants must meet one of three tests. The profit test requires HK$35 million attributable to shareholders in the most recent year and HK$45 million aggregated over the two preceding years - HK$80 million in total - with expected market capitalisation of at least HK$500 million. The market-capitalisation/revenue test requires HK$4 billion market capitalisation and HK$500 million revenue in the latest year. The market-capitalisation/revenue/cash-flow test requires HK$2 billion market capitalisation, HK$500 million revenue and HK$100 million cash flow.
Inside information
Part XIVA, effective 1 January 2013, requires a listed corporation to disclose inside information as soon as reasonably practicable. Inside information is specific, not generally known, and price-sensitive. Safe harbours cover incomplete proposals or negotiations, trade secrets, disclosure prohibited by law, and liquidity support from the HKMA. The SFC's Guidelines on Disclosure of Inside Information require reasonable internal controls - a designated person, escalation and a documented assessment - and directors must take reasonable precautions.
Disclosure of interests
Part XV requires substantial shareholders (5% or more) and directors to notify their interests, generally within three business days. Failure is an offence.
Worked example
A listed company's auditor resigns. Management wants to wait for the next results. Under Part XIVA the resignation is inside information and must be disclosed as soon as reasonably practicable; delay must be justified by a specific safe harbour. The MMT can impose a fine of up to HK$8 million for breach.
Traps
Assuming SEHK alone polices disclosure; forgetting safe harbours exist; mixing the three admission tests; treating Part XIVA as requiring instant disclosure in every case.