Extending the Black Out Period on Share Trading by Directors in Hong Kong: In Whose Court Does the Ball Lie?

Abstract

On 29 December 2008 some 260 companies and individual businessmen took the unusual step of taking out full page advertisements in leading local newspapers to voice their objections to the proposal by The Stock Exchange of Hong Kong to extend the 'black out' period on the trading of shares by directors. The proposal which implementation was originally scheduled for 1 January 2009 was subsequently deferred by three months to 1 April. However this concession has not appeased critics who have called for the proposal to be dropped altogether.

This paper does not discuss the merits of the proposal or the reasons that have been put forward to pre-empt its implementation. Rather it focuses specifically on procedural aspects of the proposal and highlights a key issue has been overlooked amidst the noise and emotion that the debate has generated. This article argues that - contrary to common perception - the proper and competent forum to address any amendment to this proposal is not the Listing Committee of The Stock Exchange of Hong Kong but the Securities and Futures Commission albeit through the unprecedented exercise of a politically unpalatable and sensitive power.

Keywords: Share trading by directors, process and procedure for amending Listing Rules

JEL Classification: G38, K22