Policy Statement & Submission

The Hon Professor K C Chan, SBS, JP
Secretary for Financial Services and the Treasury
8/F, West Wing, Central Government Offices
Lower Albert Road, Central
Hong Kong


Dear K C,

We write to you with regard to the recent controversy over extending the blackout period during which directors of listed companies may not trade shares in such firms. As you know, the Hong Kong General Chamber of Commerce has long supported efforts to improve the efficiency and transparency of stock market transactions. Indeed, we believe a world class financial centre can do no less than its very best in such matters. That is why it concerns us when efforts to take our game to a higher level are insufficiently thought through.

We find three reasons why the proposed blackout period extension should not be implemented as planned. First, the matter of blackout periods is closely related to the timing of the release of market sensitive information. We feel that the proposed changes to the blackout period and the long-discussed proposal to move toward quarterly reporting both would have material effects on trading in directors?trading patterns. Given the highly volatile market conditions experienced in recent months, we would expect that such proposals would be considered in tandem, so that the full effects of each on the other could be well understood by all stakeholders.

Second, the consultation period was some time back, well before the terrible shockwaves crashed through markets around the world. Some who might have expressed opinions favouring a rapid move toward reforming market listing rules are likely to have second thoughts in the current environment.

Finally, we very strongly believe that changes to regulations should directly address specific problems, rather than obliquely arriving at the solution through round about steps. If, as we all agree, the objective is to reduce insider trading, then surely the first and most important step is to improve the enforcement of existing rules. If this proves insufficient, perhaps those rules ?or the enforcement mechanism ?needs attention. Further, if the objective is to reduce the time between the end of a reporting period and the release of results, there are certainly more direct steps that would specifically address that issue.

Chamber members with whom we have consulted have all expressed concern with how the recent consultations were handled, and the decision to move quickly to implement changes during a period of high volatility. While we support efforts to strengthen our financial markets, we do believe they should be handled with greater care, and with more sensitivity to current market conditions.

With best wishes for the Year of the Ox,

Yours sincerely,





Andrew Brandler
Chairman


c.c. Mr Eddy Fong, Chairman, Hong Kong Securities and Futures Commission
      Mr Martin Wheatley, Chief Executive Officer, Hong Kong Securities and Futures Commission
      Mr Ronald Arculli, Chairman, Hong Kong Exchanges and Clearing Limited
      Mr Paul Chow, Chief Executive, Hong Kong Exchanges and Clearing Limited