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2020-01-23On July 26, 2019, the Hong Kong Securities and Futures Commission (SFC) published a statement explaining its general approach to utilizing its statutory powers under the Securities and Futures (Stock Market Listing) Rules (SMLR) and the Securities and Futures Ordinance (SFO) to tackle backdoor listings and shell activities.
In recent years, problems associated with undesirable backdoor listings and shell activities have attracted wide attention. Against this backdrop, the SFC has been working closely with The Stock Exchange of Hong Kong Limited (the Exchange) to address these problems through listing policy changes and other means. The Exchange published a consultation conclusions paper on backdoor listings and continuing listing criteria together with related amendments to the Listing Rules following a market consultation.
The SFC will work in parallel with the Exchange to monitor the market and will intervene using its statutory powers under the SMLR and the SFO when appropriate to tackle these activities which harm the reputation and integrity of Hong Kong’s markets.
As set out in the statement, the SFC will take into consideration the facts and facts and circumstances of each case before deciding whether to exercise its statutory powers, including whether there are any red flags indicating a possible scheme designed to mislead regulators and/or the investing public or to circumvent applicable rules, or suggesting that other forms of serious misconduct have been or will be committed.
In deciding whether to exercise its powers of investigation under the SFO or its powers under the SMLR in cases involving backdoor listings and shell activities, the SFC will have regard to the facts and circumstances of each case including whether there are any red flags(i) indicating a possible scheme designed to mislead regulators and/or the investing public or to circumvent applicable rules or(ii) suggesting that other forms of serious misconduct have been or will be committed. Set out below are some non-exhaustive factors that the SFC considers are likely to be relevant:
Source: http://www.sfc.hk/edistributionWeb/gateway/EN/news-and- announcements/news/doc?refNo=19PR74