Articles: Financial regulatory structure

Webb on "Backchat" re the HK stock market and how to fix it
RTHK, 29-Aug-2023
The Main Board profit requirement - for whom?
Webb-site responds to the HKEX proposal which further raises the barriers to entry for smaller companies on its monopoly stockmarket and reduces investor choice. Help us out and add your voice! (14-Jan-2021)
ICAC, SFC investigate alleged corruption of listing applications at HKEX (0388)ICAC announcement
SFC, 26-Jun-2019
Webb-site first heard the allegations on 30-May and they were reported in media since then, so evidence may have been lost before the SFC and ICAC launched raids on 2 sponsors, 2 listed companies and a printing firm from 23-Jun onwards. A former Joint Head of the IPO Vetting Team and 2 of his associates have been arrested by the ICAC. You may wonder why a for-profit listed company is in the "business" of regulation. That's because the HK Government rejected the advice of its Expert Group to remove the conflict in 2003. The HK listing process also involves a high degree of subjectivity on "suitability". Any such process invites corruption.
Freedom and the future of China: Webb's talk at HKU on 30-Oct-2018 (video)Text of speech
YouTube, 29-Nov-2018
Freedom and the future of China
This is the text of a High Table dinner speech delivered by Webb-site founder David Webb to the students of Chi Sun College, University of Hong Kong, this evening. Hyperlinks have been added. (30-Oct-2018)
HKEX: shoot patients to prevent illness
HKEX's proposal to suspend and then delist companies with disclaimed audits works against investor interests in several ways while doing nothing to address the root causes of corporate illness. In a partial revival of the 2002 Penny Stocks proposals, the self-interest of HKEX in ditching unprofitable business cannot be ignored. We again call for the regulatory function to be transferred to the SFC and HKEX's monopoly to be abolished. Only when there is competition can they pick and choose their customers. HKEX fails to name the 43 firms that would have been suspended on their 2017 audits. Answers by Tuesday morning, please! (30-Sep-2018)
Why HK has no retail bond market
The HK Government's Pilot Bond Grant Scheme is needless corporate welfare and deflects from the real problem: by protecting bank profits from competition for funding and effectively excluding retail investors, the Government and HKMA are preventing a liquid, exchange-traded bond market from emerging. We explain what they need to do instead. (13-May-2018)
Censure of Mr Fu Jiwen, absent former ED of Huarong Int Fin (0993)
SEHK, 3-Apr-2018
He was an ED until 2-Sep-2015. Subsequently, he failed to respond to investigation enquiries by the Listing Department of the Stock Exchange. It's another demonstration that the Exchange is an ineffective regulator - it is a for-profit company without statutory investigative powers. The listing regulatory function should be moved to the SFC, which could then at least seek co-operation from its mainland counterpart.
Webb on "The Pulse" re the Enigma Network (video)
RTHK, 16-Dec-2017
Submission on Capital Raisings by Listed Issuers
Webb-site responds to HKEX's consultation which, while positive, ignores several key issues and does not go far enough in others. Have your say! (24-Nov-2017)
Statement on the conclusions on HK Listing Regulation
HK loses on two levels from today's climbdown by the SFC. (15-Sep-2017)
One Board, One Regulator
We respond to HKEX's 2nd attempt to introduce 2nd-class shares via a "New Board", rather than cleaning up its existing boards and transferring listing regulation to the statutory regulator which oversees takeovers, the SFC. Coupled with recent moves to embed the Communist Party in the constitutions of state-controlled enterprises, HK and China risk a toxic combination of no votes for government and no votes for capital, leading to an emerging tycoon-Communist Party oligarchy. We propose a better approach. (7-Aug-2017)
Webb on "Newswrap" re HKEX third board and GEM
RTHK, 16-Jun-2017
Shareholder activist David Webb says the Hong Kong Stock Exchange, which has proposed setting up a new board to open ways for more mainland tech companies to list in the city, is going in completely the wrong direction. He said Hong Kong should have a single board, rather than confusing the market with more boards. He told Jim Gould that a simpler structure should also have better disclosure and governance requirements.
China Innovative Finance (0412) bubble
Hao Tian Development (0474) has confirmed our view by dumping 9.06% of CIFG at a 61.9% discount, still well above the net tangible asset value of $0.099. CIFG should trade below NTAV due to its appalling governance and membership of what we call the "Chung Nam Network". The purported profits of its leasing division are largely illusory and depend heavily on 1 customer in which CIFG has invested. HTD has also been allowed by HKEX to skirt the Listing Rules on corporate transactions. (26-Sep-2016)
Activist Webb pushes for even more radical listing reforms
HK Standard, 7-Sep-2016
By "radical" they mean "rational".
Submission by Anthony Neoh, SC on listing regulation, 20-Aug-2016
Mr Neoh, who was Executive Chairman of the SFC from 1995 to 1998, has kindly shared his submission with Webb-site. (6-Sep-2016)
Submission to SFC-HKEX consultation on listing regulation
These are our views on SFC-HKEX proposals to reform regulation of listings and listed companies. If you are an investor who cares about the future of HK's markets, please submit your support. The proposals are better than the status quo, but a political compromise on the 2003 Expert Group recommendation to transfer regulation to the SFC, and that should be Plan B. (6-Sep-2016)
Webb on CNBC re listing regulatory reform
CNBC, 16-Aug-2016
Presentation on HK securities market reform
These are the slides from a presentation by David Webb to accountants hosted by legislator Kenneth Leung this evening. (16-May-2016)
HKEx drops second-class shares proposal
SEHK, 5-Oct-2015
HKEx has finally thrown in the towel on its attempts to list second-class shares. Corporate governance was already bad enough without making it even easier to abuse minority shareholders. Charles Li’s campaign to do this exposed the blatant conflict of interests in the Exchange being a for-profit regulator. This conflict should now be addressed by transplanting the listing function to the SFC, the statutory regulator. The Listing Committee, dominated by issuer interests, needs radical reform too.
SFC statement on SEHK's draft proposal on weighted voting rights
SFC, 25-Jun-2015
Hurray! This should kill it, as all changes to Listing Rules must be approved by the SFC. The SFC board "unanimously concluded that it does not support the draft proposal for primary listings with WVR structures". Now Government should recognise the huge conflict of interest in HKEx being a for-profit rule-maker and regulator. The Listing Division should be transferred to the SFC and merged with its Corporate Finance Division which oversees the Takeovers Code, as a Government-appointed Expert Group recommended in 2003.
HKEx signs MoU with CCB (0939)
Company media release, 15-Sep-2014
This MoU, for "strategic cooperation" again puts HKEx into a conflict of interest with its role as listing regulator of CCB, as it has done with China Minsheng Banking (1988). The SFC should take over as listing regulator of both banks.
Minsheng tax grab, HKEx conflicts
Minsheng Bank (1988) just grabbed RMB115.6m from H-share holders and paid it to the Government with no good reason. We explain why bonus share issues by PRC issuers are not just silly but damaging to shareholder value. We also look at the conflict of interest for HKEx, which recently signed a strategic MoU with Minsheng and is pursuing relationships with other banks while acting as their listing regulator. The SFC should now take over regulation of these listings, but has declined to do so. (30-Jun-2014)
We had a dream too!
Following the hallucinations in HKEx non-elected director and CEO Charles Li Xiao Jia's blog yesterday, Webb-site had a dream last night! (26-Sep-2013)
Alibaba's spotlight on HK regulation
10 years after the Expert Group report, Alibaba's requests spotlight the unresolved conflict of interests of HKEx between profit and regulation, creating an opportunity for Government to put this back on the agenda. They should now follow through, strip HKEx of its regulatory role, create a Listings and Takeovers Authority under the SFC, and remove the special provisions of HKEx's own constitution which make it a Government-controlled company. (18-Sep-2013)
The alternative Budget Speech, 2013: Prosperity through Reform
Webb-site reveals the Hong Kong Budget Speech which should be delivered next Wednesday. (22-Feb-2013)
The FSDC: under development
The Financial Services Development Council is apparently still under development itself. Confusion reigns over what form it will take, how it will be funded (if at all), and even the identity of persons appointed to it. We'll try to add some clarity. (24-Jan-2013)
HKSAR v Theodore Cheng Chee Tock & Philip Yu
HK District Court, 30-Oct-2012
"The flouting of listing rules...might well be exacerbated by a lack of tight regulation and a comprehensive mechanism to punish those who manipulate the system. It is also clear to see that quite many people in the senior management level of companies failed or were reluctant ot distinguish their own fund and the funds of a public listed company." - District Judge Stanley Chan.
Lessons from Lehman Minibonds looks beyond the Lehman minibonds fiasco and proposes three steps to reform the regulatory system for the sale of financial products. Without such reforms, there is a risk of either repeated crises or an outright ban on the sale of such products. Tell us what you think in our opinion poll. (20-Oct-2008)
Building a Value Proposition for HK
HK Chief Executive Donald Tsang recently convened an Economic Summit of 33 people, which spawned 4 focus groups, including one on financial services, which in turn produced 3 working groups, one of which, headed by HKEx government-appointed director and Chairman Ronald Arculli, has sought submissions on the markets. This is our submission. (4-Oct-2006)
The SFC Chairmanship: Submission to the Panel on Financial Affairs
The Government is proposing to create a non-executive, token-payment Chairmanship at the SFC. In a submission invited by the Legislative Council's Panel on Financial Affairs, we argue that this would be dangerous and wrong in principle. (20-Dec-2004)
Submissions on Proposals to Enhance the Regulation of Listing
D-graded PERL of the Orient
The Government has announced its decision on Proposals to Enhance the Regulation of Listing. This represents only glacial progress. While they leave the door open for more meaningful reform in future phases, that is about as likely and imminent as universal suffrage, and not unrelated to that problem. We also look at the way investors have been relegated to a footnote in the report. (28-Mar-2004)
PERL: Strickland's Submission
It transpires that editor David Webb was not the only director of HKEx to make a personal submission to the Government on the Listing Consultation. We have obtained a copy of John Strickland's submission, and in the interests of transparency, we publish it here. (28-Mar-2004)
Submissions on proposals to enhance the regulation of listing
HK Government, 26-Mar-2004
Conclusions on proposals to enhance the regulation of listing
HK Government, 26-Mar-2004
Our PERL Submission editor David Webb, an investor-elected director of HKEx, has submitted his response to the Government's consultation on Proposals to Enhance the Regulation of Listing. You can read it here, and make your own submission using our form. (1-Feb-2004)
The Reason for Resistance
We take a detailed look at the ongoing battle over the regulation of listed companies in Hong Kong, now in its third round of consultations after the PIPSI report and the Expert Group report, and take a look at the HKEx Chief Executive's recent statements on the subject, which has yet to be discussed by the board to which he reports, including editor David Webb. (30-Oct-2003)
Consultation Paper on Proposals to Enhance the Regulation of Listing
HK Government, 3-Oct-2003
Hong Kong takes stock of market regulation
Asia Times Online, 11-Apr-2003
Disserving the Public Interest
HKEx, having announced a commitment to co-operate with Government's adoption of the Expert Group's plan to shift its regulatory role to the SFC, is now fighting it. We sat down last Monday with Charles Lee, who said that HKEx was obliged to put the public interest first and co-operate with the Government's proposal. Now he has done a U-turn. Did HKEx make a false and misleading announcement? And what about dictum meum pactum? (31-Mar-2003)
Hong Kong: System under Scrutiny
Asiamoney, 27-Mar-2003
HKEx responds to the Report by the Expert Group
Company media release, 21-Mar-2003
Financial Secretary's response to Expert Group recommendationsTranscript
HK Government, 21-Mar-2003
"We will work with relevant parties, particularly SFC and HKEx, to draw up a programme for implementing the Expert Group's recommendations for the transfer of listing functions. We will put forward a proposal to the Executive Council as soon as possible."
Report by the Expert Group on securities and futures market regulatory structureMedia release
HK Government, 21-Mar-2003
Expert Group Submission
In the interests of transparency and debate, is publishing its submission to the Expert Group to Review the Operation of the Securities and Futures Market Regulatory Structure. The three-man group has the opportunity to recommend far-reaching reforms. (25-Nov-2002)
PIPSI Report
The report by the Government-appointed Panel of Inquiry into the recent "Penny Stocks Incident" was released on Tuesday. looks beyond the blame game and into the recommendations for structural reform of the regulatory system. (15-Sep-2002)
Penny-stocks minister says 'I'm sorry'
South China Morning Post, 12-Sep-2002
PIPSI Submission
The HK Financial Secretary appointed a 2-man Panel of Inquiry into the recent "Penny Stocks Incident". In the interests of transparency, is publishing the letter we received from PIPSI and our submission in response. (18-Aug-2002)
The Delisting Fiasco
Despite clear warnings of the consequences, HKEx on Thursday announced proposals to delist companies that fail to meet certain criteria of market cap, shareholders equity, profitability, clean audit reports or nominal share prices. The rational consequence was a crash in micro-cap stocks on Friday, followed by a hurried Sunday afternoon withdrawal of the proposals, for now at least. We give you the background. (29-Jul-2002)
Listing Chaos
We review a chaotic month on the Government policy front in general and the HKEx in particular, and look at the broader issues surrounding the current proposals, or rather the lack of them. Merging two issuer-dominated Listing Committees together will not address the needs of investors, while the Government ducks the real problem of having a for-profit toothless regulator rather than SFC regulation and statutory backing for the Listing Rules. (28-Jul-2002)
New GEM Exemptions
Over a year after consultation ended, new rules have been announced for HK's second board. The track record requirement is reinstated to two years, but with a glaring exemption for candidates that can meet certain "substantial size" and "significant public following" criteria. So small scams are unacceptable, but big ones are OK, and if you can con 300 people, you don't need a track record. As we explain, this is not going to salvage GEM's tattered reputation, and the process again underlines the need to move listing regulation to the SFC. (30-Jul-2001)
Consultation on a proposed new listing status
SEHK, 9-Sep-1991
This document was catalysed by a request from the Jardine Matheson Group to have a trading-only listing in HK after it shifted its Primary Listing to the UK, even though most of the trading volume was expected to remain in HK. Ultimately SEHK did not proceed with the proposal, and the 5 Jardine companies moved their primary listing to the UK. HK became a secondary listing but the group in 1994 delisted from HK.
The Operation and Regulation of the HK Securities Industry (the Ian Hay Davison report)
HK Government, 27-May-1988

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