The Securities and Futures Commission called for better separation between business executives and the listing department in a report that found lacking prevention of internal conflicts of interest at the bourse.

The SFC concluded that the Hong Kong Exchanges and Clearing (HKEX) failed to sufficiently build a «Chinese Wall» – a barrier to block information exchange – between executives motivated by IPOs and the listing department which should be focused on vetting candidates.

«The listing department’s Chinese wall protocol contains numerous ambiguities, does not fully address key aspects of the Chinese wall and may be difficult for department staff to interpret and follow,» the SFC report said. 

Too Close

Examples of excessive closeness between the two functions include cases where listing department staff attended introductory meetings with prospective IPO candidates alongside HKEX executives. The SFC found chief executive Charles Li Xiaojia and the then listing head David Graham as an example of staff from both functions simultaneously attending such meetings in 2018. 

«[This] may give an impression that the listing department is assisting the HKEX business side to win business or to service issuers and applicants,» the report said.

Indirect Pressure

Closeness aside, the SFC also highlighted examples of indirect or implied pressure applied to listing department staff such as «repeatedly referring to the desirability of those applicants or by copying the chief executive to whom the head of listing reports on an email».

Scrutinization of the bourse’s listing approval process began after Hong Kong’s Independent Commission Against Corruption charged former senior executive Eugene Yeoh Kim-loong for accepting bribes totaling HK$9.15 million ($1.18 million) in between 2017 and 2019 to approve IPOs with a hearing scheduled for later this year. Yeoh was the former co-head of the team responsible for vetting IPOs within the listing department during the period. 

«We look forward to continuing to work closely with the SFC to refine and further raise the competitiveness of our listing regime,» according to an HKEX spokesperson.