November 8, 2016 / 2:51 AM / 2 years ago

UPDATE 2-HK regulator says surge in company probes warrant new listing rules

* Too early to predict what reform will look like - SFC’s Alder

* Rejects critics’ claims changes would “stunt” market (Adds Alibaba IPO decision, weighted voting rights discussion)

By Michelle Price

HONG KONG, Nov 8 (Reuters) - Hong Kong’s securities regulator said on Tuesday the number of inquiries into market manipulation and insider trading, as well as corporate governance and disclosure issues, has doubled over the past five years, making it necessary to change listing rules in the Asian financial hub.

Speaking at the Thomson Reuters Pan-Asian Regulatory Summit in Hong Kong, Ashley Alder, chief executive of the Securities and Futures Commission (SFC), said it was too early to predict what the final listings reform will look like. He disputed claims from critics that changes would “stunt” the local equities market.

The regulator proposed an overhaul of listing rules in June that would potentially curb the regulatory powers of the city’s stock exchange and hand more authority to the SFC.

While the SFC said new rules would speed up decision-making for new listings, the proposed changes pitted international asset managers, who favoured the changes, against the city’s banks and The Chamber of Hong Kong Listed Companies, a body that represents locally listed companies.

“This is all about a more efficient, accountable and transparent process,” Alder said.

Alder highlighted growing concerns over the poor quality of companies on Hong Kong’s Growth Enterprise Market, some of which had seen huge price spikes immediately after listing. He said these developments made efforts to ensure the Hong Kong market is fit for purpose all the more urgent.

“It’s very hard for me to imagine why any market regulator would be motivated to pursue policies which could stunt the healthy development of the financial centre for which it’s responsible,” Alder said. “That certainly doesn’t describe the SFC I know.”

Alder also left the door open for consideration of weighted voting rights for stock listings in the city - as opposed to the city’s long established ‘one share, one vote’ principle. The subject was a hot topic that surrounded Chinese e-commerce giant Alibaba Group Holding Ltd’s move to opt for a $25 billion listing two years ago in New York, not Hong Kong.

Alder said the regulator had never decided weighted voting rights were impossible for Hong Kong.

In 2014 Alibaba originally wanted to go public in Hong Kong with a shareholding structure that gave company insiders control even though they didn’t hold a majority of shares, breaching the ‘one share, one vote’ principle.

Alibaba co-founder Jack Ma said last week that outdated regulations in Hong Kong could hurt the appeal of the city to new economy companies looking to list in the city, and that a local site for an initial public offering of shares in Alibaba’s finance affiliate Ant Financial was not a foregone conclusion. (Reporting by Michelle Price; Writing by Elzio Barreto; Editing by Richard Pullin and Kenneth Maxwell)

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