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Investment banks argue Hong Kong’s proposed SPAC rules are too rigid -sources

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HONG KONG — Investment banks and corporate advisors are pushing back against Hong Kong’s proposed rules for blank check listings, arguing they are too onerous and will not make the city competitive, three sources with knowledge of the matter said.

Interested parties have until Oct. 31 to lodge submissions with the Hong Kong stock exchange over its proposed framework for Special Purpose Acquisition Companies (SPACs).

The criticism comes at a time when rival Asian financial hub Singapore has shot ahead with its preparations to allow SPACs, which raise money on stock markets to buy private companies, giving those businesses a quick and cheap route to a listing.

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Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing, speaking after the company’s quarterly results, said the bourse “will be combing through responses (to the consultation) and addressing issues raised,” adding it wanted to introduce “a high quality product” and protect investors’ interests.

The sources, who have worked on submissions, said key concerns raised include a proposed requirement that any SPAC deal be worth at least HK$1 billion ($130 million) as that excludes smaller buyout targets. The sources were not authorized to speak to media and declined to be identified.

The proposed rules also stipulate that there need to be at least 75 professional investors in a SPAC listing, 40% of which must be institutional while retail investors cannot participate until after the company has carried out its merger – requirements likely to make trading illiquid, the sources added.

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The rules also require the merged entity to appoint a financial sponsor to carry out due diligence and meet the exchange’s existing listing requirements which could tack on another three to six months to the listing process.

“It is of the view to some practitioners that it could undermine the intention of offering the SPAC as an alternative and streamlined listing approach,” the city’s Financial Services Development Council said of the due diligence requirement in a submission lodged on Wednesday.

The SPAC consultation paper says the bourse does not want to replicate U.S. SPAC rules but instead plans to create a regime “tailored to the particular risks and requirements of the Hong Kong market,” adding that several proposals are “designed to provide a high entry point for SPAC listing applicants and De-SPAC targets.”

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Hong Kong’s Securities and Futures Commission told Reuters in a statement it would work closely with the exchange to take into account market feedback when finalizing the new rules.

There has been nearly $137 billion worth of SPACs issued globally so far in 2021, according to Refinitiv. The pace of deals has fallen sharply https://www.reuters.com/business/finance/how-wall-streets-hottest-dealmaking-trend-fizzled-2021-09-16 since the first quarter, however, with U.S. investors spooked by the vehicles’ poor financial performance and a regulatory crackdown.

While Hong Kong is still debating its rules, Singapore last month became the first Asian market to allow SPACs to list, making concessions after the initial proposals were seen as too strict.

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European asset manager Tikehau Capital is among the first https://www.reuters.com/article/tikehau-capital-listing/asset-manager-tikehau-capital-applies-to-list-spac-on-sgx-sources-idUSKBN2HH05F to plan a SPAC listing in Singapore, sources have told Reuters.

“I think there is a concern that the proposed SPAC regime for Hong Kong is less competitive than that in other jurisdictions,” said Vivian Yiu, a Hong Kong-based capital markets partner at law firm Morrison & Foerster.

“While the Stock Exchange is understandably putting in place these safeguards to prevent abuse and market manipulation, there is perhaps room for relaxation in some areas as retail investors are excluded from investing until the de-SPAC completes,” she said.

Hong Kong authorities have spent years trying to combat illegal practices linked to the formation and speculative trading of shell companies, which they say provide opportunities for market manipulation and insider dealing. Those concerns resulted in strict rules in 2019 that constrain back door listings. (Reporting by Scott Murdoch and Alun John in Hong Kong; Editing by Edwina Gibbs and Peter Graff)

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Saudi Arabia’s Most admired Companies in 2022

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Insights Success is an archway that caters to Entrepreneurs’ quench of technology and business updates which are currently ruling the business world.
We are ceaselessly proving the best platform for leading companies, which aids indefinite progress while creating meaningful learning experiences for the visitors and invaluable brand awareness for the clients.



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Bank of England raises base interest rate to 1.75%

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The Bank of England has raised the base interest rate by half a percentage point to 1.75 per cent, the biggest rise since 1995, in an attempt to combat runaway inflation.

The nine-strong monetary policy committee voted eight to one in favour of a 50 basis point rise, defying some market expectations for an increase by 25 basis points.

It is the Bank’s sixth consecutive tightening in monetary policy and follows in the footsteps of the US Federal Reserve and European Central Bank, which have begun aggressively raising rates by larger increments.

Interest rates are now the highest since 2009 as the Bank attempts to bring down inflation, which is running at a 40-year high of 9.4 per cent and is on course to exceed 11 per cent later this year.

These would be the worst inflation rates in the G7, caused in large part by rising global energy prices driving household bills higher this year. The UK economy is also heading for a slowdown this year as consumer incomes are squeezed more tightly than since the 1950s.

Andrew Bailey, the Bank’s governor, has hinted that it will also announce how it intends to begin unwinding the £850 billion of government debt pumped into the economy since the financial crisis, offloading bonds worth between £50 billion and £100 billion from as early as next month.

The Bank will also deliver its quarterly outlook, with Bailey expected to forecast that inflation will rise beyond 11 per cent and remain in double digits into next year. The Bank’s target is 2 per cent.

Commenting on today’s Bank of England interest rate rise, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “This rise is the clearest signal yet of the Bank of England’s intention to get inflation under control. Spiralling prices are cited by businesses as by far and away the top concern right now.

“However, given the extremely precarious state of the economy, this decision is not without risk for businesses and consumers that are exposed to banking or overdraft facilities.

“There are many causes of the current inflation crisis – global supply chain problems, trade barriers, soaring energy costs, increased taxes, and labour market shortages. Interest rate rises alone will do little to address these.

“Worryingly, our research indicates strongly that most small businesses are not investing for growth, and that longer-term confidence is beginning to wane.





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Opinion: OSC appointment fuss is a tempest in a teapot

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Jeffrey MacIntosh: The government has the legislated right to have a say in the agency’s course

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Ed Waitzer’s recent op-ed (“The issue at the OSC is integrity, not debate,” July 14, 2022) expresses surprise and disappointment in my recent op-ed (“Conflict at the OSC: Why the regulator needs to make room for dissent,” July 7, 2022). In that op-ed, I argued that lawyer Heather Zordel’s appointment as non-executive chair of the OSC in March of this year should be met with open arms, as it introduces new points of view into what seems to be a rather intellectually closed shop. I don’t suppose it will come as a shock to Ed Waitzer or anyone else that I am surprised and disappointed at his rebuttal.

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To begin with, it contains a number of inaccuracies. It states that Ms. Zordel was denied reappointment to her earlier position (2019-2021) as part-time commissioner. In fact, given her busy legal practice, she took herself out of the running. This puts a rather different complexion on the matter.

And I never stated or implied that Ms. Zordel was not reappointed as part-time commissioner because of two dissenting opinions that she wrote as commissioner. My point was that for Ms. Zordel’s critics the dissents were a factor in opposing her appointment as chair of the board.

The nub of my argument was that the OSC could benefit from greater variety of viewpoints among its brass as to what investor protection and other aspects of the OSC’s mission entail. By contrast, Mr. Waitzer argues: “the importance of debate and dissent is not the point here.” I beg to differ. As I indicated, some prominent accounts of Ms. Zordel’s appointment have put a pejorative cast on her disagreements with her fellow commissioners. That puts the issue of debate and dissent front and centre.

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I certainly agree with Mr. Waitzer that the independence of administrative agencies is a cornerstone of our democracy. But does that mean that every administrative agency should be entirely divorced from any government oversight whatsoever — a little fiefdom unto itself and in no sense answerable to its political masters? Not a whit. It is the government that creates the agency, defines its mandate, gives it the powers that it needs to carry out that mandate and defines its organizational structure. And it is entirely within the purview of the government to enlist its legislative power to re-define that mandate, powers, and organizational structure if it chooses.

We don’t have to look into the distant past to find an example. On the advice of a non-partisan blue ribbon panel — the Capital Markets Modernization Taskforce (“CMMT”) — the Conservative government has recently substantially reorganized the OSC via the Securities Commission Act, 2021 (declared in force in April). That legislation splits the adjudicative function (the “Capital Markets Tribunal”) from the regulatory function. Moreover, where before the reorganization the OSC Chair and CEO were the same person, the two offices are now split. As expressed by the CMMT, “The Board of Directors, led by the Chair, (will) focus on the strategic oversight and corporate governance of the regulator,” while “The CEO (will) be responsible for the overall management of the organization and execution of the OSC’s mandate.” The directors, including the chair, are all government appointees.

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This new structure, recommended by a non-partisan committee, gives the government of the day the power to influence, at the highest level, the strategic direction of the OSC. But why should it not? If the government is dissatisfied with the strategic vision or regulatory philosophy of the regulator or the manner in which it is being implemented, it would be profoundly anti-democratic — and at odds with the rule of law — to forbid the government from seeking to alter the agency’s course.

Indeed, the Ontario Securities Act states “The Commission is an agent of the Crown in right of Ontario.” The key word here is “agent.” It is not “hegemony,” “fiefdom” or “satrapy.” At the end of the day, the OSC is a government creation performing regulatory functions ceded to it by the government.

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Do Ms. Zordel’s conservative connections compromise the independence of the institution of which she is now head? Absolutely not. In the making of such appointments, the twin issues of competence and integrity will take up a lot of shelf space. But why should the government not also consider, if it chooses, whether potential nominees share the government’s regulatory philosophy

The true worry about political interference is that the government might attempt to dictate or influence the result of particular cases. But the new legislation builds in the important protection of ceding no operational powers to the board of directors. Thus, aside from the government’s power to approve or decline proposed rule changes (a longstanding feature of securities regulation), its sole discretionary avenue of influence lies in its power to appoint directors and hence influence high-level strategic direction.

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What is left of the argument that there has been inappropriate political interference over the OSC? Only the assertion that Ms. Zordel and three other part-time commissioners were appointed without the government having consulted the OSC, as has customarily been done. Yes, it would have been better if the government had consulted the OSC. In all likelihood, however, the outcome would have been the same. The OSC might not like not having been consulted but at best this is a foible not a fiasco.

In the end, this tempest easily fits within a standard-issue teapot.

Financial Post

Jeffrey MacIntosh is a professor of law at the Faculty of Law, University of Toronto, and a director of the Canadian Securities Exchange.

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