Corporate governance enforcement in Hong Kong

1
Corporate governance enforcement in Hong Kong

• Charles Grieve
• Director, Corporate Finance Division
• Securities Futures Commission
• Hong Kong

2
Enforcement of common law duties

• Fiduciary duty to the company
• Company has to enforce duty
• New right for shareholders to sue in the name of
  the company
• Expensive

3
Enforcement problems

• Jurisdictional issues
• significant portion of listed companies in PRC
• PRC not MMOU signatory
• Cross-border listings bring problems
• Greater cross-border regulatory co-operation
  essential
• IOSCO APRC helping co-operation

4
Enforcement of legislation

• Shareholder rights enforced by shareholders
  through the courts
• Criminal acts prosecuted by ICAC police
• courts are prepared to hand down hard penalties
• Directors obligations by regulators
• late filing proper books and records
• depends on courts view of seriousness

5
Enforcement against others

• New licensing regime for sponsors - January 2007
• Action against 4 sponsors in last 2 years
• settlement of HKS 30 million
• Deloitte agreed to refrain from acting as sponsor
  for 9 months
• Regulation of auditors
• FRC and AIB
• increased oversight

6
Enforcement of Listing Rules

• Limited sanctions
• No powers to obtain evidence
• Limited appetite to judge on compliance with
  fiduciary duties
• Securities legislation false and misleading
  information to regulators

7
Way forward

• SFC to take on key elements of Listing Rules
• periodic reporting, ongoing reporting of price
  sensitive information, transactions that need
  shareholder approval
• statutory powers to investigate,
• greater sanctions on individuals fines,
  disqualification
• egregious cases go to criminal courts
• Does not cure jurisdiction problem

8
Thank you