When the Hong Kong Stock Exchange knocks, open the door and cooperate

The Stock Exchange of Hong Kong Limited (SEHK) recently published its new Guidance Note on Cooperation (Cooperation Note) and revised Enforcement Sanctions Statement (Sanctions Statement). The Cooperation Note is a brand new guidance note that stresses SEHK’s expectations regarding cooperation. It sets out examples of good cooperation with the possible benefits and examples of uncooperative conduct with the possible consequences. The revised Sanctions Statement provides additional guidance on SEHK’s expectations of parties’ reliance on third parties in the discharge of duties and a listed company’s internal controls. These follow the SEHK’s enhancements to its disciplinary powers and sanctions (see our June 2021 e-bulletin) and the previous revisions of its Enforcement Policy Statement and Sanctions Statement (see our July 2021 e-bulletin).

Key takeaways for listed companies, directors and senior management

• Listed companies, directors and senior management that are subject to SEHK’s disciplinary regime are expected to cooperate with the SEHK during its investigations and/or disciplinary actions.
• Cooperation may be recognised by reducing the sanction recommended by the Listing Division or imposed by the Listing (Review) Committee; and/or the inclusion of a cooperation statement in the SEHK’s disciplinary publication (eg news release or statement of disciplinary action).
• Cooperation will generally need to be at an exceptional level in order to constitute a mitigating factor. Mere compliance with statutory or regulatory obligations does not in itself amount to cooperation.
• In contrast, a failure to cooperate may itself be considered as a serious breach and may warrant the most severe sanctions.

Please see the full bulletin here.