Press Release

LCQ1: Regulatory requirements in respect of disclosure of listed companies

Wednesday, February 26, 2003

Following is a question by the Hon Martin Lee and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (February 26):

Question:

Early this month, at the request of the Stock Exchange of Hong Kong Limited (SEHK) and the regulatory authority in the United Kingdom (UK), the Pacific Century CyberWorks Limited (PCCW) responded to press reports about its plan to make a takeover offer for the Cable and Wireless plc in UK by issuing two public announcements with different contents one after another. However, the first announcement submitted to the SEHK did not make full disclosure of the matter. In this connection, will the Government inform this Council:

(a) whether it has assessed if the regulatory standards and requirements of the local regulatory bodies for listed companies are lower than those of UK, and if this is the reason for PCCW's failure to make timely and full disclosure of the matter in Hong Kong;

(b) whether it knows if the local regulatory bodies have investigated this incident to ascertain whether PCCW has violated the provisions of the Listing Rules and the relevant legislation; and

(c) how the Government and relevant regulatory bodies will follow up this incident?

Reply:

Madam President,

The Government does not comment on individual cases, especially those which are being dealt with by regulators. Pacific Century CyberWorks Limited (PCCW) is a company listed in Hong Kong. Listed companies are under the independent regulation of the Stock Exchange of Hong Kong Limited (SEHK) and the Securities and Futures Commission (SFC), and the Government plays no part in specific cases. In fact, the SEHK has earlier on issued a press release stating that it is seeking clarifications and further details from PCCW on the matter. The SFC will monitor the follow-up actions taken by the SEHK. The Government respects the independence of the regulatory bodies provided for under the law and believes that they will handle the case concerned with competence and impartiality.

As to Member's specific questions, I shall reply as follows:-

(a) Since the case of disclosure of information by PCCW in relation to its takeover offer for the Cable and Wireless plc is being followed up by the SEHK, we are, at this stage, unable to comment on "PCCW's failure to make timely and full disclosure of the matter in Hong Kong" as stated in the question. As to the regulatory requirements of our local regulatory bodies in respect of disclosure of listed companies, I have sought clarification from the SFC and the Commission confirmed that in this regard we are on a par with international standards, including those of the United Kingdom. In particular, the requirements for listed companies in both Hong Kong and the United Kingdom relating to disclosure of price-sensitive information, mergers and takeovers are closely similar.

In fact, to maintain and enhance our competitiveness as a leading international financial centre, the Government, together with the SFC, the Exchange and other concerned parties, has all along been keeping our corporate governance and regulatory standards under review so as to ensure they are in line with international standards.

(b) As the frontline regulator, the SEHK has earlier on issued a press release stating that it is seeking clarification and further details from PCCW. The SFC will discharge its statutory functions and monitor the follow-up actions taken by the SEHK.

(c) I just mentioned above that the SEHK is following up the case and that the SFC will monitor this. Under the three-tiered regulatory framework, the Government distances itself from the day-to-day work of the regulatory bodies, and does not interfere with individual cases. Only when there are cases which may have policy implications will Government look into them from the policy angle, so that necessary follow-up actions could be taken. It is from this angle that I have enquired of the SFC whether there is any significant difference between the regulatory standards of Hong Kong and the United Kingdom regarding corporate disclosure. The SFC has confirmed that Hong Kong's regulatory requirements in this regard are closely similar to those of the United Kingdom.

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