stock exchange and listing rules/ requirements

8/9/2019 Stock Exchange and Listing Rules/ Requirements

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FINANCIAL LAW ANDFINANCIAL LAW ANDREGULATIONSREGULATIONS

WEEK 5

Stock Exchange and Listing Rules/

Requirements


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The Stock Exchange of Hong Kong (SEHK) commenced trading in April 1986

the front-line self-regulatory body

supervised by the SFC

wholly owned by the Hong Kong Exchanges &Clearing Ltd (HKEx)*

operates the securities market and the stock

options market

*Note: Through the reform in 2000, The Stock Exchange of Hong Kong

Limited, Hong Kong Futures Exchange Limited (HKFE) and together with

Hong Kong Securities Clearing Company Limited (HKSCC), merged under a

single holding company, HKEx.


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Objectives of SEHK

trading place for securities facilities for conducting business operate a market trading platform for

stocks, bonds (approved by SFC) provide settlement system protect the interests of market

participants establish just and equitable markets


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Objectives of SEHK

- establish rules for

- trading rights

- listing

- levies- commission

- promote recognition of stock exchange


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Rules of the SEHK

The Rules of the Exchange cover all

aspects in the securities markets including

listing rules, as well as requirements onprofessional conduct and short selling

regulations


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The Hong Kong Futures

Exchange (HKFE)

- established in 1976

- operates market for the purpose of dealing

in commodity, futures or option contracts

on commodities, precious metals and

financial instruments


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The Hong Kong Futures

Exchange (HKFE)- wholly owned subsidiary of HKEX

- self-regulatory body on front-line business

of the futures markets

- supervised by the SFC


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- the security of a public limited company

is admitted for trade on an exchange

- a complex process regulated by

the Stock Exchange of Hong Kong (SEHK) and

the Securities and Futures Commission (SFC)

Note: SEHK is a recognized exchange controller under

the SFO, acting as the primary regulator of StockExchange Participants

Listing on the Stock Exchange


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Listing Requirements

Acceptable jurisdictions

- Hong Kong

- Bermuda- Cayman Islands

- Peoples Republic of China


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Accounting standards

- Hong Kong Standards

- International Standards (IFRS)- United States of America Standards


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Financial requirements

1. Profits Test

2. Market Capitalization/ Revenue Test

3. Market Cap

/ Revenue

/ Cashflow Test


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Operating History and Management

- trading record of at least 3 financial years

- management continuity- ownership continuity & control

for at least the most recent audited

financial year

- have a core business


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Public Float and New Issue Price

- at least 25% issued shares held by public

- issue price cannot be below nominal value


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Methods of Listing

- New Issue

- Offer for Sale- Placing

- Introduction

- Capitalisation Issue

- Rights Issue


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Additional Requirements for PRC Issuers - incorporatedlimited company in the PRC

- sufficient protection to holders of H shares- annual accounts in Hong Kong or

International accounting standards

- different nature of shareholders rights

of domestic and overseas listed shares- settled by arbitration in Hong Kong or

PRC at the election of the claimant


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Listing Documents

- History and development

- 3 year financial record- director & senior management particulars

- trading and future prospects


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Listing Documents

- Auditors report

- Property valuation- Bases and assumptions of profit forecast

- Information in relation to the issue

- Statement of responsibility


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Listing Agreement

- required to sign a listing agreement

to comply with the continuing obligation

- ensure to keep the public fully informed


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Listing Agreement

requires:

- release of price-sensitive information- all users have access to same information

- maintenance of a fair & orderly market


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Disciplinary Actions- sanctions

- suspension of listing

- cancellation of listing


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Sanctions

Parties subject to sanctions

- issuer- director

- substantial shareholders

- sponsors

Disciplinary Actions


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Sanctions

- a private reprimand

- a public statement- If a director remains in office following a

public statement, suspend or cancel

the listing

- report to SFC or other regulatory bodiesor law enforcement authorities


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Suspension of Listing

- fail to comply with the Listing rules

- insufficient securities in public hands

- insufficient level of operations or assets- no longer suitable for listing



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Temporary Suspension

- Under the direction of SEHK or SFC

or at the request of the company- disclosure of price-sensitive information


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35. Suspension by the Company

- must announce the reason and

the anticipated end of the suspension


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Review Questions

GEM has been a listing platform for

enterprises of high growth and technological

innovation. Discuss the main differences in

listing requirements with the Main Board inthe areas of accounting, finance and

operating experience for the listing

candidates.


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Growth Enterprise Market (GEM)