Presentation on theme: "From Paper to Paperless Update on the Electronic Disclosure Project (EDP) Media Workshop 8 June 2007."— Presentation transcript:
From Paper to Paperless Update on the Electronic Disclosure Project (EDP) Media Workshop 8 June 2007
2 Agenda Background of EDP Preparing stakeholders EDP operations Changes to HKEx websites Suspension arrangements under EDP Questions and Answers
3 Background Electronic Disclosure proposals in summary: –Abolish mandatory requirement for paid ad in newspapers –Mandate electronic submission –Provide straight-through processing –Require issuers to establish their own website by 25 June 2008 New Measures effective from 25 June 2007 Transitional arrangements: –Until 24 December 2007 issuers to publish a notification in newspapers –Until 24 June 2008 issuers without their own website must continue to publish announcements in newspapers Communication, education and familiarisation
4 System enhancements HKEx has enhanced related systems to cope with EDP implementation ISC /mobile alert service - enhanced to support more frequent dissemination and expanded stock coverage AMS/3 - enhanced to provide traders with issuer news alert whenever an announcement is posted on HKEx website HKEx website - enhanced to support display and searching of free-text title and selected headline categories Issuer Information feed System - enhanced to carry free-text title and headline categories and support more effective dissemination of issuer information ESS and EPS – enhanced to support higher system capacity, straight- through dissemination of issuer documents, new headline categories, provision of title and tightened security control
5 Preparing issuers (1) ESS registration - All active equity issuers (except those prolonged suspended) and agents completed registration. New issuers join in on an ongoing basis. Familiarisation Sessions - 17 sessions held in April and March, with total number of participating company exceeding 2,900 (representing 99% of all listed issuers) and achieving the successful submission of nearly 6,500 documents. Readiness confirmations - Almost all listed issuers (97%) have confirmed in writing their readiness for EDP implementation. Familiarisation Following issuer and agent briefing sessions in early 2007, HKEx has made continuous efforts to prepare listed issuers for EDP.
6 Preparing issuers (2) FAQs - Detailed guidance on ESS usage and EDP-related matters are available to listed issuers through the publication of a comprehensive set of Frequently Asked Questions. EDP web corner - Other supporting documents including ESS user manuals, training materials, reference documents and Listing Rules changes have been posted on EDP web corner on HKEx website. ESS Hotline service - Issuers and agents are well supported by ESS hotline which received over 2,900 calls during the familiarisation and hands-on sessions. Over 98% of respondents were satisfied with the answers given and the hotline service. Support for issuers
7 Market communication Promotion and advertisement - HKEx has promoted EDP via paid advertisements in local newspapers and electronic means; HKEx will arrange further promotion in June. Informed Investor campaign – HKEx is working closely with 25 organisations, including almost all major brokers and banks offering online trading services, to promote EDP and the free ISC news alert service. Posters and handbills are distributed to the general public via brokers, professional bodies and public libraries. Subscribers of the ISC news alert service rose by 36% in seven weeks to 27,767 as at 1 June. Briefings for Exchange Participants (EPs) and Information vendors - Information on EDP and its implications to brokers and information vendors was delivered via various briefing sessions and EP circulars. Communication with professionals - Speeches and articles about EDP have been presented at various platforms. Apart from the publication of a communication paper and the opening of public viewing room, HKEx continues to raise public awareness of EDP.
8 Market readiness Successful completion of familiarisation sessions Readiness of EDP related systems Confirmation by listed issuers on their EDP readiness Extensive market communication and education The Hong Kong securities market is ready for the new era of Electronic Disclosure to commenced on 25 June 2007
9 EDP Operations (1) ESS operational hours Monday - Friday, 6am - 11pm (business days only) Non business day immediate preceding a business day, 6pm - 8pm Publication windows Different Publication windows for various types of issuer documents All Announcements and Notices cannot be disseminated between 9:00am – 4:15pm, except for the following: –overseas regulatory announcements –clarification on unusual share price/turnover movement or media reports –suspension notices –result announcements (between 12:30pm – 1:30pm only) Other documents including Circulars and Annual Reports can be submitted anytime during ESS operational hours.
10 EDP Operations (2) Language Submission of English and Chinese versions must be simultaneous, except listing documents and annual reports which should be submitted one immediately after the other, and certain single language documents (e.g. overseas regulatory announcements) Title and Headline categories Issuers must select all headlines as appropriate (the list of headline categories is set out in an appendix to the Listing Rules. Guidance materials will be published) Issuers must input in the designated free-text field the same title as that in the document
11 Latest Listed Company Information Display of issuer- selected headline categories and document title Changes to HKEx website (1)
12 Listed Company Information Search Content search for document title Search by headline category Changes to HKEx website (2)
13 Changes to HKEx website (3) Board Meetings Notification is now displayed under the “Investor” section
14 Changes to HKEx website (4) Dividends & Other Entitlements is also under the “Investor” section
15 Changes to HKEx website (5) Trading Arrangement Table is now under the “Trading Information” section
16 Changes to HKEx website (6) Basket Warrants & Exotic Warrants Information is now spilt into two tables under the “Derivative Warrant Resources Centre”
17 Suspension Arrangements under EDP Any changes under EDP? Suspension principles Primary publication channel for GEM issuers Primary publication channel for Main Board issuers Publication window Assessment criteria Duration of suspension
18 Suspension Arrangements under EDP Suspension Principles Issuers have a continuing obligation under Listing Rules to provide timely disclosure of all price sensitive information and ensure the even dissemination of that information. Trading suspension is the tool to address potential and actual market disorder. For instance, there is uneven dissemination of price sensitive information and the issuer is unable to publish an announcement in a timely manner. Trading suspension will only be lifted after issuer has published the announcement, and investors have been given sufficient time to consider the price sensitive information. Duration of suspension should be for the shortest possible period.
19 Price Sensitive Information (PSI) Information relating to the issuer that is necessary to enable investors to appraise its position, or information which might materially affect trading of the issuer ’ s securities (e.g. favorable or adverse changes in financial performance; group reorganisation, material transactions) Certain material transactions are deemed price sensitive under the Listing Rules (e.g. major transaction, very substantial acquisition, very substantial disposal, issuance of securities.) Suspension Arrangements under EDP Assessment of what is price sensitive information is made by the issuer, having regard to the specific circumstances and its own position.
20 Primary channel for publication of announcements Current regime: newspapers for Main Board issuers and GEM website for GEM issuers EDP regime: HKEx website for Main Board issuers and GEM website for GEM issuers Suspension Arrangements under EDP Failure to publish the announcement on the primary channel in a timely manner may result in suspension of trading.
21 Suspension Arrangements under EDP Publication window (EDP) With a few exceptions (e.g. certain non-PSI announcements), publication of announcements will be outside trading hours (i.e. between 4:15 pm to 11 pm or between 6:00 am to 9:00 am) Results announcements can be published during the lunchtime publication window (i.e. 12:30 pm to 1:30 pm).
22 Criteria 1: Is the subject matter of the announcement price sensitive information? EDP brings no change. Criteria 2: Is publication of the announcement timely? EDP changes the primary publication channel for Main Board issuers to the HKEx website Suspension Arrangements under EDP Assessment Criteria
23 Current regime: suspension of Main Board issuer is lifted after the publication of the issuer ’ s announcement in newspapers on the next day. EDP regime: suspension of Main Board issuer will be lifted after the publication of the issuer ’ s announcement on HKEx website and sufficient time has been allowed for investors to consider the information. Suspension Arrangements under EDP Duration of suspension Duration of suspension may be shortened due to the change of primary channel from daily newspapers to Internet.
24 Suspension Arrangements under EDP Need for suspension? Main Board issuers (other than results announcements) Non-PSI: Regardless of the time of publication → no suspension PSI: Depending on the publication time → –No suspension if the announcement is published on the HKEx website by 11:00 p.m. (or the 2-hour submission window on a non-business day before a business day) –Suspension for half day if the announcement is published by 9:00 am of the next business day
25 Suspension Arrangements under EDP Example 1: Issuer announces a major transaction No suspension if the announcement is published on a timely basis Current regime: submission to newspapers on that evening (Day 1) for publication on the next business day (Day 2) EDP regime: announcement submitted and published on HKEx website by 11:00 p.m. on that evening (Day 1) Issuer missed the cut-off deadline that evening (Day 1). Current regime: announcement is not published in newspapers on the next day (Day 2), suspend for a day (Day 2) pending publication in newspapers on the following morning (Day 3). Resume trading in the morning of Day 3. EDP regime: issuers may submit and publish on HKEx website before 9:00am the next morning (Day 2) and resume trading in the afternoon (Day 2). Main Board issuers (other than results announcements)
26 Suspension Arrangements under EDP Example 2: Issuer announces a continuing connected transaction which it determines not to be price sensitive Issuer should publish the announcement as soon as possible. No suspension for late publication as subject matter is not PSI Suspension practices under current and EDP regimes are the same. Main Board issuers (other than results announcements)
27 Suspension Arrangements under EDP Need for suspension? GEM issuers (other than result announcements) Same as non-results announcements for Main Board issuers, except –Publication deadline extended from 11:00pm in the evening to 9:00am of the next business day. Suspension is not required if the announcement is published during the morning window. –Contrary to the Main Board, there is no newspaper notification requirement. –In practice, the new deadline is similar to the current regime.
28 Suspension Arrangements under EDP Need for suspension? Result announcement (for Main Board and GEM issuers) Same as non-results announcements for Main Board issuers, except: Publication deadline is extended from 11:00pm of the day of board meeting to 9:00am on the next business day for issuers. Suspension is not required if the announcement is published during the morning window. If the 9:00am deadline is not met, publication can be made during the lunchtime publication window on the same day. Suspension for half day. New suspension practice is consistent with the current suspension policy which allows results announcements to be published during the lunchtime publication window. The new practice should reduce the need for suspension as issuers have more opportunities to publish the announcement.
29 Suspension Arrangements under EDP Example 3: issuer conducts board meeting in the afternoon on Day 1 to approve preliminary final results No suspension if the announcement is published on a timely basis Current regime: announcement is i) published on HKEx website that evening or next morning before trading (Day 2); and 2) submitted to newspapers on that evening (Day 1) for publication on next business day (Day 2) EDP regime: announcement is published on HKEx website by 11:00pm of that evening (Day 1), or 9:00am of the next business (Day 2) Issuer missed the newspaper cut-off publication deadline that evening: Current regime: results are not properly disseminated. Suspend for a day (Day 2) pending publication in the newspapers on the following morning (Day 3) EDP regime: –No suspension if issuer publishes the announcement on HKEx website before 9:00am the next morning (Day 2), –Suspend for half day if announcement is published during the lunchtime publication window of the next business day (Day 2). Results announcements (Main Board and GEM issuers)
30 Example 4a: issuer conducts board meeting in the morning of Day 1 to approve preliminary final results Announcement published on the HKEx website during the lunchtime publication window on that day (Day 1). –Current regime: submission to newspapers on that evening (Day 1) for publication on next business day (Day 2). If the results announcement is not published in the newspapers, suspend for a day (on Day 2). –EDP regime: announcement is already published on the HKEx website. Example 4b: issuer conducts board meeting in the morning of Day 1 to approve preliminary final results Announcement not published during the lunchtime publication window that day. –Under both current and EDP regimes, no suspension if confidentiality can be maintained and announcement can be published by 9:00 am the next morning Suspension Arrangements under EDP Results announcements (Main Board and GEM issuers)
31 Publication in the newspapers (Main Board issuer only) As transitional arrangement, notification must be published in the newspapers until 25 December 2007 If the issuer has made no effort to publish the newspapers notification and the subject matter of the announcement is price sensitive, suspension for a full day may be required Suspension will be evaluated on a case by case basis. The Exchange will make enquiries with the issuer on circumstances leading to the failure, balancing the requirement to notify investors against the interest of the investing public to trade in the securities. Suspension Arrangements under EDP
32 Suspension Arrangements under EDP In sum, there will be more flexible publication windows for issuers because: –Where price sensitive announcements are posted by 9:00am on the next day, trading can resume in the afternoon session. –Results announcements can be published by 9:00am and no suspension is required. Where the morning deadline is missed, the announcement can be published during the lunchtime publication window (between 12:30pm to 1:30pm), trading can resume in the afternoon session. The new regime is expected to reduce suspensions, increase market availability and facilitate trading of securities on a fully informed basis. The ESS submission process is streamlined (e.g. text file for ASM/3 will no longer be required) and will accelerate the publication process. Conclusion