Abolition of Paid Announcement Requirement An Overview

1
Abolition of Paid Announcement Requirement An
Overview
January 2007
2
Outline

• Background
• Project Objectives
• Scope of Change
• Implications
• New Model
• Operational Readiness
• Way Forward
• Implementation

3
Background

• HKEx has a policy direction to abolish
  requirement for Main Board issuers to publish
  announcements by way of paid announcement in at
  least one English-language and one
  Chinese-language gazetted newspaper.

4
Project Objectives

• The No Paid Ad Project (NPA) aims to enhance the
  issuer information dissemination regime in Hong
  Kong by
• abolishing the requirement for paid announcements
  in newspaper
• introducing mandatory electronic submission by
  listed issuers
• automating the process for publication of issuer
  documents on HKEx and GEM websites and
• enhancing the presentation and user-friendliness
  in the display and searching of issuer documents
  on HKEx websites

5
Scope of Change (Current Regime)
Issuer announcements and other documents required
under Listing Rules
???
Issuers
?
Scope of NPA
?
?
?
HKEx websites
(Announce-ments and other documents)
ePublication System (EPS)
eSubmission system (ESS)
No
Yes
Vetting?
or
?
Issuer Information Feed (IIS)
Information vendors
??
?
?
ESS for vetting
?
?
?
(Pre-vetted announcements)
?
Market Data Feed (MDF)/EMSIS
CD-Rom/diskette
?
Clearance
ASCII-Text
ASCII-Text
or
Trading terminals
Input and uploaded by ISD
AMS/3
?
?
?
?
???
Fax
Listing Division
6
Scope of Change (New Regime)
Scope of NPA
Issuers
Issuer announcements and other documents required
under Listing Rules
??
?
?
?
?
?
?
(Announce-ments and other documents)
Investors
eSubmission System (ESS)
No
Yes
ePublication System (EPS)
Vetting?
?
Information vendors
Issuer Information Feed (IIS)
ESS for vetting
?
?
?
(Announcements and other documents)
?
Market Data Feed (MDF)/EMSIS
News alerts
News alerts
Clearance
AMS/3
Trading terminals
?
?
?
???
Listing Division
7
Implications (1)

• What does NPA mean for Hong Kong?
• Close alignment with international norms
• Allows more timely dissemination of issuer
  announcements to the market
• Builds the foundation to move towards the
  ultimate model of dissemination of information
  during trading hours, when considered appropriate
• Assists in the move towards a post-vetting
  regulatory model

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Implications (2)
What does NPA mean for issuers and investors?

• Reduce continuous listing costs
• Cease the requirement for the submission of text
  file version
• Adapt to new submission regime including
  mandatory usage of ESS, publication windows and
  selection of headline categories and title
• Establish own website
• Clearer classification of issuer document due to
  headline categories and title
• Faster access to issuer documents due to straight
  through publication
• Adjust behaviour of HK-based retail investors
  regarding access to issuer documents (i.e. from
  newspaper paid announcements to online access via
  HKEx or issuer websites)
• Benefit to overseas investors

Issuers
Investors
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New Model (1)

• Main Features - Overall
• MB issuers will no longer be required to publish
  their announcements in local newspapers in the
  form of paid advertisements
• MB issuers will be required to publish
  notification in newspapers during 6-month interim
  period (Phase 1)

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New Model (2)

• Main Features - Submission Channel
• Mandatory use of HKExs Electronic Submission
  System (ESS) for submission of documents for
  publication on Exchanges website and GEM
  website. No diskette or CD will be accepted.
• To submit documents for publication, all issuers
  and their agents need to be registered for ESS.
• Security passwords will be issued to issuers (but
  not agents)
• Non-listed offerors submitting Takeovers
  Code-related documents for publication on HKEx
  website will also need to be registered for ESS.
  Documents can be submitted by adviser but
  security passwords will be issued to offeror
  only. Thus early registration of offeror is
  recommended.

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New Model (3)

• Main Features - Submission window
• Announcements
• No submission of announcements for publication
  during trading hours and lunchtime, except
• results announcements (can be submitted 1230
  p.m.- 130 p.m. on business day),
• overseas regulatory announcements,
• standards and supers clarifying share
  price/turnover movements or media reports
• suspension notifications
• Subject to above exceptions, business day
  submission windows are
• 600 a.m. 900 a.m. (but may result in
  suspension)
• 415 p.m. - 1100 p.m.
• Further submission window on non-business day
  immediately preceding business day 600 p.m.
  800 p.m.

12
New Model (4)

• Main Features - Submission window
• Documents other than announcements

• Documents other than announcements (e.g.
  circulars and annual reports) can be submitted
  for publication at any time during the ESS
  opening hours (i.e. 600 a.m. 1100 p.m.)
• Simultaneous submission of English and Chinese
  versions (except listing documents and annual
  reports submitted one immediately after the
  other) if not, document will not be accepted by
  ESS
• Exceptionally, some single language documents,
  e.g. overseas regulatory announcements

13
New Model (5)
Other Features Issuers Own Website

• MB issuer must also publish full announcement on
  own website (if any)
• All documents requiring publication on HKEx
  website must be published on issuers own website
• Usual situation
• no later than 1 hour after such submission
• Exception
• Document submitted after 700 p.m. - deadline
  for publication on issuer's own website is 900
  a.m. on the following business day
• Document must remain on issuers website for at
  least 5 years
• Main Board issuer that does not have its own
  website will, before requirement for all issuers
  to have their own websites becomes effective, be
  required to publish its LR announcements in
  newspapers in addition to publication on HKEx
  website

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New Model (6)
Other Features Issuers Own Website

• 1 year after commencement of Phase 1, every
  issuer must have its own website where public
  must be able to access the document free of
  charge
• Issuer's website does not need to be hosted on
  domain owned or directly operated by issuer
• Website is assigned dedicated location on
  Worldwide Web
• Website may be hosted on third-party domain or
  operated by third party, but issuer must retain
  control over contents of its website
• Source of document must be from issuer (not from
  HKEx web site)
• Upon requirement becoming effective, Main Board
  or GEM issuer that does not have its own website
  will be in breach of Listing Rules

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New Model (7)
Other Features Headline Categories/Title

• Mandatory selection of headline categories
• When submitting document through ESS for
  publication on Exchanges website, issuer must
  select all such headlines as may be appropriate
  (List of headline categories included as an
  appendix to the Listing Rules)
• Responsibility to select correct headline on
  issuer
• Submitter should endeavour to prioritise order of
  headlines
• Issuer able to amend headlines through ESS within
  5 days of publication (once only)
• Mandatory use of title
• Issuer must input into designated free-text field
  in ESS the same title as appears in document

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New Model (8)
Other Features Notification in newspapers

• Notification to be published in newspapers for 6
  months (i.e. during Phase 1) instead of
  announcement
• Notification does not require pre-vetting

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New Model (9)
Headline category
Free-text title
Issuers own website
Caveats
Inspection of announcement
SAMPLE Notification
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New Model (10)
Other Features - Suspension

• At present, suspension of trading first notified
  to public by means of short notice prepared by
  HKEx which is published on HKEx website
• Starting with Phase 1, where issuer requests
  suspension, issuer must immediately submit
  announcement through ESS to HKEx for publication
  on HKEx website or GEM website informing of
  suspension and setting out brief reasons
• Upon receipt of electronic copy from issuer, such
  announcement will be published by HKEx provided
  suspension has been effected
• Suspension announcement is only required to be
  published on HKEx or GEM and issuers own
  website, no notification or announcement required
  in newspapers

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New Model (11)
Other Features - Suspension

• Strict enforcement of 1100 p.m. submission of
  announcement for publication deadline
• General principle - electronic copy of
  announcement received by 11.00 p.m., notification
  published in newspapers next morning
• 600 a.m. 900 a.m. the following day -
  however, if PSI may need to suspend
• To avoid suspension, strongly recommend adhering
  to general principle

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New Model (12)
Summary Chart
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Operational Readiness (1)

• To help ensure issuers/agents adequately prepared
  for changes
• Issuers/agents seminars
• Familiarisation sessions
• week-ends
• 4-hour sessions conducted online 900 a.m.
  100 p.m. (morning session) or 200 p.m. 600
  p.m. (afternoon session).
• Issuers and advisers to be notified by letter of
  assigned session - participation mandatory for
  issuers, optional for advisers
• Written confirmation of participation (and
  operationally ready and adequate knowledge of
  ESS) required of issuers
• Interactive e-learning CD
• Hotline (listing-related matters) 2840 3577
• Hotline (publication-related matters) 2840 3460

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Operational Readiness (2)

• Contingency measures
• If and when necessary to invoke any particular
  contingency measure, will publish relevant
  contingency arrangements on HKEx website - may
  allow for use of diskettes or CD ROMs
• Such arrangements would only come into effect if
  and when, in our determination, there were
  problems with ESS preventing generally timely
  submission of documents to HKEx for publication 
• Issuer would not be permitted to invoke such
  contingency arrangements unilaterally

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Way Forward

• Abolition of paid announcement requirement will
  also lay foundation for news dissemination model
  (being considered for the medium term) whereby
• issuers' announcements can be released at any
  time during the day, including during trading
  hours
• majority of announcements are not vetted prior to
  release
• Facilitate full and timely disclosure of
  price-sensitive information, as well as reduce
  incidence of trading suspensions, contributing to
  enhanced investor confidence in Hong Kong market.

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Implementation

• ESS registration process
• Familiarisation and confirmation of participation
• Security passwords being sent out to issuers in
  Q1 2007
• Issuers must return acknowledgement slip for
  security passwords for activation by HKEx
• Tentative commencement date Q2 2007

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• Thank you!