What is the purpose of the IPO reform in Hong Kong?

"The report itself is not aimed at the same power share." In the face of speculations from the outside world, on July 7, Chen Yi-ting, a member of the Hong Kong Financial Development Authority's (HKFB) Financial Development Research Group, Economic Report "said in an interview.

Not long ago, the Board released a report by Chen Yuting, "Positioning Hong Kong as the International First-Choice IPO Center," proposing to reform various aspects of the IPO system in Hong Kong, including the establishment of a classified market and the inclusion of different legal structures in Hong Kong Listing, etc., triggering market speculation adjustment system for Alibaba return to Hong Kong market "paving the way."

"I did not participate in the discussions on Alibaba." Chen Yi-ting stressed that the upcoming Shanghai-Hong Kong Stock Connect will bring new opportunities for the Hong Kong stock market and it is necessary for Hong Kong to seize the opportunity to further strengthen the IPO market.

Equal rights is just a classification of different ways

The report argues that the current stock market in Hong Kong is divided into only the main board and the GEM, and there is no more detailed market classification. Over the years, the GEM has been volatile. Hong Kong's IPO market has focused its attention on the listed companies on the Main Board, while many different companies on the Main Board are regulated by a set of partial-retail-oriented rules.

In general, 10% of IPO IPO in Hong Kong is reserved for retail investors and 90% are institutional and other professional investors. A 2012-2013 HKEx survey found that domestic retail investors accounted for 18% of all participants, while overseas retail investors accounted for about 5%.

However, the overall system guided by the protection of retail interests has raised the overall standard of compliance for other investors. Chen Yi-ting believes that for overseas companies wishing to attract mature and strategic investors, meeting the current across-the-board standards in Hong Kong lacks flexibility.

The report suggests that some overseas markets may be consulted for a more specific and detailed classification of the Hong Kong stock market to set different "rules of the game" for different categories. For example, the London Stock Exchange is divided into the main board market, alternative market, professional market and professional fund market, in which the motherboard market is subdivided into three markets of high quality, standard and high growth.

"The report does not rigidly define the classification method." Chan Yat-seng explained that under the existing classification of the main board and the GEM, about 20 different investment companies already exist in the mainboard market, which are different from the ordinary ones. Such companies do not operate their businesses, To act as a similar investment manager, investors can not judge the future trend based on the actual performance of the company. The risks are different from those of the general public companies listed on the Main Board. However, these companies are not clearly distinguished from each other.

In addition to the existing taxonomy, another way is to classify according to the legal framework. Chan Yat Ting pointed out that there are currently a few commercial trusts listed on the Hong Kong Stock Exchange in Hong Kong. These are not the same as the legal risks of companies listed on the Main Board, but no clear distinction is made.

Similarly, the same share of the same rights is also a taxonomy can be considered, macroscopically, the same stock means that the ownership of shares held by some shareholders and control is not proportional to the small control may be large, is the typical control, you can Say it is a different point of risk (with the general public company). "Chen Yi-Ting explained, but the report itself is not for the right to different shares.

HKEx said earlier that it will conduct public consultation on the issue of the right to different classes of shares. Chen Yi-ting said that if the public consultation that there is a need to adjust, then we should consider changing the existing rules, "do not need time does not mean do not do."

At present, there are over 1300 listed companies on the mainboard market in Hong Kong, and the number will continue to grow in the future. Chen Yi-ting believes that although the number of different types of companies may not be large at present, the number of listed companies will continue to increase in the future. "There are many different ways to differentiate the market. We can think about how to make a difference and then look at how to formulate corresponding game rules."

At this stage should not push collective lawsuit

Some people in the legal profession think that under the arrangement of different rights in the same share, the class action system in the United States provides the institutional guarantee for the minority shareholders, which is still lacking in Hong Kong.

Chen Yi-Ting admitted that class actions, including the agreement on risk-based agreements, are not available in Hong Kong at present. However, class-action and class-share-difference are two different topics. Hong Kong can not promote class-action litigation in the future .

"Class actions will affect many different participants. If a class action lawsuit is to be sued in Hong Kong, there will be more changes that need to be amended, which will have a great impact on the current legal environment." Chan Yat-ting said tracking the class action litigation has been conducted for more than 10 years The Law Reform Commission once said in a report that Hong Kong can implement this system in the long run. However, at this stage, it is still suggested that some industries, such as the retail industry's first, more complex securities and IPO markets, are not suitable for the implementation of class actions .

At present, the interests of the minority shareholders in Hong Kong are mainly protected by the Securities and Futures Commission ("SFC"). Since the second half of last year, the SFC has repeatedly asked the court to issue certain securities to certain listed companies (including delisted ones Company) to sue for small shareholders for compensation.

"In the future, the Securities and Futures Commission (minority shareholder protection) tools can still be applied." Chen Yi-ting argues that the SFC can continue to seek compensation for minority shareholders through existing channels even after the implementation of the same rights issue.