The Stock Exchange of Hong Kong Limited (“HKEX”)

HKEX published “Analysis of Corporate Governance Disclosure in March year-end 2015 annual reports” (click here for press release). This follows a previous review of compliance by issuers with a December year-end in their 2014 annual reports.

What you should know:

• The findings are similar to the last review, as noted in our Nov 15 update. There was a high rate of compliance with the Code Provisions (“CPs”), which are subject to the “comply or explain” regime. However, HKEX observed that the quality of explanations on why issuers deviate from the CPs vary, and reflected “boilerplate” use.
• HKEX stated that it expects the explanation of deviations from CPs to be “informative and clear”, also covering (i) the measures taken instead of compliance, (ii) the decision process; (iii) considered reasons. Click here for our more detailed summary, extracting useful examples given

What you should do/watch for:

As we start preparing our 2016 interim reports, “preparers” of reports should take into consideration the identified improvement areas regarding explaining deviations from the CPs.

The Securities and Futures Commission (“SFC”)

SFC obtains disqualification orders against former senior executives of China Best Group Holding Limited for breach of directors’ duties.

What you should know:

• It involved the company’s acquisition of a mine, a very substantial acquisition
• the seller was in fact connected with a defendant (who was “advisor to the board”, previously executive director), who concealed such information. He was disqualified for being a director for 10 years
• The other two executive directors (one being the wife of the above defendant) were found to have failed to make reasonable enquiries in respect of the acquisition, and wrongfully authorized the issue of corporate announcements. They were disqualified for being directors for 6 years

What you should do/watch for:

Directors’ duties is a recurring theme in SFC’s enforcement actions.

Competition Commission’s first actions and emerging focus

What you should know:

• “Bid-rigging”– the Commission found patterns consistent with bid-rigging in residential building renovation and maintenance market after analyzing tender records of selected public projects (click here for press release)
• Launched publicity campaign against “bid- rigging”
• “Trade associations” — the Commission intervened in “recommended retail price” of branded cigarettes by the Hong Kong Newspaper Hawker Association, resulting in its withdrawal (click here for press release)

What you should do/watch out for:

• Review your procurement and tendering process, whether as purchasers or suppliers
• Review involvement with trade associations—watch out for practices that may be anti-competitive, and establish policies and procedures (“do’s and don’ts”) to guide operating units in dealings
• Review your pricing strategy for possible breaches of “resale maintenance”
• International experience: complaints as an important trigger for investigations

Privacy Law

Further action relating to direct marketing

What you should know:

A marketing company was fined ($16k) for failing to (i) obtain a person’s consent for direct marketing; (ii) failing to comply with his “opt out request”. This case was triggered by a compliant. The complaint made a reservation with a restaurant of a hotel and provided his surname and telephone number. He has since received a number of calls from an outsourced promotor, though he already indicated in a call that he was not interested and requested the caller not to call him again.

What you should do/watch out for:

As observed in previous updates, “privacy” should be a watch area for businesses. The Privacy Commissioner for Personal Data appears to be an “active” regulator. There is also much heightened stakeholder sensitivity generally and the level of complaints has arisen. Companies that keep personal information for direct marketing must maintain an “opt out list” of customers that do not consent to “direct marketing”, and comply with this including monitoring outsourced marketing companies.