The government has started a consultation on a proposal that will require listed companies to disclose price-sensitive information (PSI) promptly in order to assist investors in making informed investment decisions.

The government has proposed specifying in the law that a listed corporation should disclose to the public as soon as practicable PSI has come to its knowledge. Otherwise, companies could suffer civil, rather than criminal sanctions.

They could be fined HK$ 8 million, and the individuals concerned could be barred from becoming company directors for five years.

The move is stiffer punishment for listed firms that fail to disclose price-sensitive information promptly. At present, these companies are just reprimanded by the Stock Exchange, which said Monday it welcomes the government's new proposal.

The Secretary for Financial Services and the Treasury Professor K C Chan said he hopes this will help change the disclosure culture of companies.

"It would help demonstrate to the market our commitment to enhancing market transparency and quality, thereby enhancing Hong Kong's position as an international financial center and the premier capital formation centre in the region," Chan said.

However, financial commentator David Webb said a criminal rather than civil sanction would be more effective in a push for disclosure from listed companies.

In fact, there are circumstances that will allow companies to delay disclosure. The consultation proposal sets out some "safe harbors" to allow listed corporations to not disclose or delay disclosing certain PSI, such as when the information is a trade secret, or when the information is related to pending negotiations.

The government said the disclosure requirements will be enforced by the Securities and Futures Commission (SFC), which is also consulting the public on its draft guidelines to explain "inside information" and its application. "We support statutory backing of the disclosure obligation on listed companies, as that would represent a key step to enhance transparency and the quality of Hong Kong's securities markets," said Martin Wheatley, SFC's chief executive officer.

The public can submit their views before the end of the consultation on June 28. Subject to public comments, the government plans to introduce a bill to the Legislative Council in the 2010/11 legislative session.

(HK Edition 03/30/2010 page2)