Hong Kong Sponsorship Manager Association: Suggests the Securities and Futures Commission to adjust, not remove, the priority issuance and employee stock purchase plan.

The Hong Kong Sponsorship Executive Association has responded to the Securities and Futures Commission's document consultation on the proposed amendments to the Securities and Futures (Stock Market Listing) Rules, which was issued on March 28, 2025, before the deadline. The Association appreciates the efforts made by the Securities and Futures Commission to enhance market transparency and protect investors, and supports most of the suggestions. However, the Association holds different opinions on some of the proposals, especially the recommendation to remove the issuance of securities based on the existing shareholding proportion of shareholders through preferential subscription and the exercise of subscription rights under employee share plans. The Association believes that this may weaken the financing capabilities of listed companies and impact their ability to quickly raise funds in times of market volatility. Therefore, the Hong Kong Sponsorship Executive Association has proposed the following alternative suggestions: Adjustment rather than removal: It is recommended that the Securities and Futures Commission implement other regulatory measures, such as requiring prior approval from the Securities and Futures Commission and the Stock Exchange for preferential issuances and employee share plans, and implementing a two-stage screening process. The first stage would be a quick initial review, with a rapid approval if there are no obvious issues; the second stage would involve a thorough investigation of potential issues to balance regulatory requirements with market efficiency. Additional measures: These include establishing a blacklist of problematic issuers, tightening annual issuance limits, and requiring more detailed disclosures and confirmations from independent non-executive directors. The Association remains neutral on some of the SFC's proposals. For example, the Association has reservations about the proposal to simplify the resumption of trading process. While this proposal aims to improve efficiency, the Association believes that based on historical data, the success rate of resuming trading is low (only 22%) due to difficulties in implementing corrective measures by the issuers, rather than the administrative process itself, therefore simplifying the process may not significantly shorten the time for trading suspension. In addition, the Association also holds a neutral position on the proposal to appoint the Securities and Futures Appeals Tribunal as the review body, pointing out that this may affect the balance of power between regulatory bodies and weaken the role of the Securities and Futures Appeals Tribunal as an independent review body, and further evaluation is needed on its actual impact on market participants. The Association also suggests that the SFC provide more practical guidelines to clarify under what circumstances it would choose to oppose a listing or suspend trading, rather than just applying conditions, in order to enhance market participants' expectations and understanding.