1. Corporate governance enforcement in Hong Kong
Charles Grieve
Director, Corporate Finance Division
Securities & Futures Commission
Hong Kong

2. Enforcement of common law duties
13 September 2006
Enforcement of common law duties
Fiduciary duty to the company
Company has to enforce duty
New right for shareholders to sue in the name of the company
Expensive

3. Enforcement problems Jurisdictional issues
13 September 2006
Enforcement problems
Jurisdictional issues
significant portion of listed companies in PRC
PRC not MMOU signatory
Cross-border listings bring problems
Greater cross-border regulatory co-operation essential
IOSCO APRC helping co-operation

4. Enforcement of legislation
13 September 2006
Enforcement of legislation
Shareholder rights enforced by shareholders through the courts
Criminal acts prosecuted by ICAC & police
courts are prepared to hand down hard penalties
Directors obligations by regulators
late filing; proper books and records
depends on courts’ view of seriousness

5. Enforcement against others
13 September 2006
Enforcement against others
New licensing regime for sponsors - January 2007
Action against 4 sponsors in last 2 years
settlement of HKS 30 million
Deloitte agreed to refrain from acting as sponsor for 9 months
Regulation of auditors
FRC and AIB
increased oversight

6. Enforcement of Listing Rules
13 September 2006
Enforcement of Listing Rules
Limited sanctions
No powers to obtain evidence
Limited appetite to judge on compliance with fiduciary duties
Securities legislation – false and misleading information to regulators

7. Way forward SFC to take on key elements of Listing Rules
13 September 2006
Way forward
SFC to take on key elements of Listing Rules
periodic reporting, ongoing reporting of price sensitive information, transactions that need shareholder approval
statutory powers to investigate,
greater sanctions on individuals: fines, disqualification
egregious cases go to criminal courts
Does not cure jurisdiction problem

8. Thank you