Hong Kong bourse told to improve ‘Chinese wall’ against conflicts of interest
July 2, 2020
By Alun John
HONG KONG (Reuters) – Hong Kong’s markets watchdog has told the Stock Exchange of Hong Kong (SEHK) to improve its “Chinese wall” protocols among other changes to better manage potential conflicts of interest.
The exchange is both a front line regulator responsible for administering listing rules and regulating listed companies, and also a subsidiary of a for-profit company Hong Kong Exchanges and Clearing <0388.HK> (HKEX), which generates revenue from listing and trading fees.
The Securities and Futures Commission (SFC) said in the report, published on Thursday, that members of SEHK’s Listing Department, which has a regulatory function, should not attend meetings with prospective listing applicants alongside HKEX business executives as this “may give an impression that the Listing Department is assisting the HKEX business side to win business.”
It also said that the listing department should take steps to improve its “Chinese wall” arrangements as the current protocol “contains numerous ambiguities … and may be difficult for Department staff to interpret and follow.”
In a response included in the report, HKEX said it has been actively considering and reviewing, amongst others, the controls relating to the organisation and operation of the listing department, and that HKEX’s business side no longer invites SEHK Listing Department officials to meetings with prospective companies.
The SFC periodically reviews the exchange’s performance.
Hong Kong ranked third in global charts for IPO fundraising last year, having raised $24.2 billion, exculding Alibaba’s 12.9 billion secondary listing, according to Refinitiv data.
In March, Hong Kong’s anti corruption watchdog charged Eugene Yeoh, a former joint-head of the bourse’s IPO vetting team, with bribery linked to IPO applications.
Yeoh declined to comment on the charges when approached by Reuters last month outside a Hong Kong magistrates court where his case was “mentioned”.
(Reporting by Alun John; Editing by Simon Cameron-Moore)