This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 9, 2017).
Hong Kong's financial regulator and the city's stock market will jointly establish an advisory panel on listings policy, where the exchange currently takes the lead.
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The panel will handle discussions on listing matters "with broader regulatory or market implications," the Securities and Futures Commission of Hong Kong said. The agreement between the regulator and exchange operator Hong Kong Exchanges & Clearing Ltd. followed a five-month consultation with market participants last year.
"The role of the SFC as a statutory regulator has evolved to have a more direct presence in more serious areas of listing regulation," the SFC said.
The vetting of new listings will continue to be in the hands of the exchange's listing committee, HKEX Chairman C.K. Chow said.
"Under the enhanced structure, the exchange will remain listed issuers' primary front-line regulator, and its listing committee will continue to make decisions under the listing rules," he said.
Companies have raised $8.8 billion through new listings in Hong Kong this year, putting the city in fourth place globally, according to data from Dealogic. Hong Kong led the world in both 2015 and 2016.
Critics such as local shareholder-rights activist David Webb says allowing the for-profit exchange operator to decide which companies may list puts its interests above investors'. In other developed markets, the vetting body sits under market regulators. In the U.S., companies must register initial public offerings with the Securities and Exchange Commission.
The exchange is weighing proposals to create a board on which companies that limit some shareholders' voting rights could list. Hong Kong's unwillingness to admit such companies cost it the IPO of e-commerce giant Alibaba Group Holding Ltd., which listed in New York in 2014.
Hong Kong's market has suffered several dramatic share plunges this year, often with no apparent cause. One in June involved the small-cap stocks of a number of companies that appeared linked by a network of cross-shareholdings.
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(END) Dow Jones Newswires
October 09, 2017 02:47 ET (06:47 GMT)