SFC seeks to codify a requirement for public companies to dislcose inside information

The SFC has today drafted guidance on what constitutes “inside information", a new term used in the proposed legislation to mean “price sensitive information". “Safe harbours” and how they would apply are also described in the “Draft Guidelines on Disclosure of Inside Information”.

The SFC notice which was issued by way of an alert reads as follows:

Consultation begins on draft guidelines on disclosure of inside information

The Securities and Futures Commission (SFC) has begun soliciting public comments on a draft set of guidelines to explain “inside information” and its application, in parallel with the Government’s publication today of proposals to make it statutory for listed corporations to make timely disclosure of “price-sensitive information”.

The Government’s consultation paper (Note 1) proposes to include in the Securities and Futures Ordinance (SFO) a statutory requirement for a listed corporation to disclose to the public as soon as practicable “price-sensitive information” that has come to its knowledge.

As part of the proposals, the SFC has drafted guidance on what constitutes “inside information", a new term used in the proposed legislation to mean “price sensitive information". “Safe harbours” and how they would apply are also described in the “Draft Guidelines on Disclosure of Inside Information”.

“We support statutory backing of the disclosure obligation on listed companies as that would represent a key step to enhance transparency and the quality of Hong Kong’s securities markets,” said Mr Martin Wheatley, the SFC’s Chief Executive Officer. “The proposed guidelines are intended to help issuers comply with the proposed statutory rule. We will continue to liaise with the Government on related initiatives, including direct access to the Market Misconduct Tribunal.”

As the proposed definition of “inside information” is the same as that of “relevant information” used in existing and prior legislation related to insider dealing (Note 2), the guidelines quote decisions of Hong Kong tribunals reached previously on insider dealing. Decisions of these tribunals regarding “relevant information” are helpful in understanding what the proposed statutory regime means when referring to “inside information”.

The public is invited to submit comments to the SFC on the draft guidelines by 28 June 2010. Written comments may be submitted online via the SFC website, by e-mail to cfdconsult@sfc.hk, by post or by fax 2810 5385.

End

Notes:

1. A copy of the Government’s consultation paper “Consultation Paper on The Proposed Statutory Codification of Certain Requirements to Disclose Price Sensitive Information by Listed Corporations” is available on its website at www.fstb.gov.hk.
2. Under the Government’s proposals, a listed corporation is obliged to disclose to the public as soon as practicable any “price sensitive information” that has come to the knowledge of the listed corporation. In defining “price-sensitive information,” it is proposed that its definition will replicate the definition of “relevant information” in section 245 of the SFO, which a person is prohibited from using when dealing in the securities of a listed corporation. It is proposed that the SFO will use the term “inside information” to refer to the “price-sensitive information” that a listed corporation needs to disclose.