Disclosure of Price Sensitive Information ("PSI") in respect of a listed corporation ("List Co") in Hong Kong has always been subjected to the regulations of The Stock Exchange of Hong Kong's ("SEHK") Listing Rules. This position is about to change pursuant to the Securities and Futures Ordinance (Amendment) Bill 2011 (the "Bill"), tabled before the Hong Kong Legislative Council in June 2011. The Bill should be read in conjunction with the Revised Draft Guidelines on Disclosure of Inside Information, issued by the Securities and Futures Commission (the "SFC").
The Bill, if passed, effectively incorporates the existing PSI disclosures obligations under the Listing Rules into the new provisions of the Securities and Futures Ordinance (Cap 571) (the "SFO"). The SFC will become responsible for the investigation of suspected breach of PSI disclosure obligations in place of SEHK, with considerably wider statutory-backed enforcement mechanism, including the authority to impose a HK$8 million fine against incompliant List Co and/or officers.
Under the Bill, a List Co must disclose "inside information" as soon as reasonably practicable after such information has come to its knowledge, unless one of the "Safe Harbour" exceptions of "inside information" applies.
Determined objectively, inside information refers to a specific information that is about the List Co, the List Co's shareholder, or List Co's listed securities (or their derivatives), which is not generally known to those persons who are accustomed to or who would likely deal in the List Co's listed securities, but which would likely to have a material effect to the price of the List Co's listed securities if such information were to become generally known. This definition is essentially the same as the current definition of "relevant information" which applies to insider dealing under the SFO.
Inside information must be disclosed to the public "as soon as reasonably practicable". List Co must take all steps necessary in the circumstances.
Under the Bill, if a disclosure-breach committed by the List Co is attributable to an officer's failure to take proper safeguards, or intentional / reckless / negligence conduct, the relevant officers are equally liable.
The "Safe Harbour" disclosure exceptions include, inter alia, when disclosure of such information would violate an order of a court; or, when the information is an incomplete proposal or negotiation or a trade secret.
With potentially severe penalties at stake, it is recommended that List Cos should ensure that adequate internal system/control be established in place so that all prospective inside information be properly attended to and handled.