Anti-bribery and Anti-corruption
The management of HKEX and its subsidiaries (Group) supports a culture of integrity, ethical conduct, fairness, honesty and openness when doing business, and zero tolerance of bribery. The business benefits of rejecting bribery are manifold and include reputational, customer, and business partner confidence. The Group is committed to ensuring that no bribes, kickbacks or similar gifts, payments or advantages are solicited from or given or offered to any person, whether in the public or private sector, for any purposes.
All Personnel (all employees (including temporary, contract seconded or work experience staff, officers and consultants), directors and members of committees of the Group) are required to adhere to high standards of business and professional and ethical conduct. A Group Anti-Bribery and Anti-Corruption Policy is in place to set out minimum standards to assist such persons in recognising circumstances which may lead to or give the appearance of involving corruption or unethical business conduct, to avoid conduct which is clearly prohibited, and promptly to seek guidance where it is not. Such Personnel should adhere to all applicable anti-bribery legislation in the jurisdictions in which the Group operates, in particular the Hong Kong Prevention of Bribery Ordinance and the UK Bribery Act 2010.
The Group Anti-Bribery and Anti-Corruption Policy prohibits all Personnel of the Group from offering, promising, giving or authorising, directly or indirectly, any bribe or kickback or facilitation payment to or for the benefit of any person in order to obtain any improper business or other advantage for the Group, for themselves, or foranyone else; or soliciting, accepting or receiving any bribe or kickback from any person in return for providing any improper business or other advantage. The Policy also sets out procedures for the handling of gifts, entertainment, sponsored travel, sponsored events, retaining third parties, political contributions and charitable donations. All Personnel must take steps to ensure that improper payments or advantages are not offered or made, or solicited or received, on their behalf by third party intermediaries. Examples of third party intermediaries might include but not limited to consultants, lawyers, tax advisers, warehouse agents, introducers of business, other agents and services providers involved in sales and marketing, brokers, political lobbyists and other professionals. There are guidelines on assessing corruption risks presented by third parties (eg, agents, suppliers and service providers) and mitigation steps (eg, additional due diligence work) to be undertaken when high risk relationships are identified. Procedures for the reporting of bribery cases and the monitoring of compliance with the Policy are also in place. The Audit Committees of HKEX and LME Clear Limited (LME Clear) and the Audit and Risk Committee of The London Metal Exchange (the LME) are responsible for the Policy and its application to their respective group company(ies).
The Group’s directors and entire workforce are made aware of the Policy which is available on the HKEX intranet. Seminars on integrity and corruption prevention conducted by the Independent Commission Against Corruption are organised regularly to ensure that all employees, particularly new joiners, are familiar with the relevant laws and regulatory requirements. The Group’s stakeholders, such as suppliers, business partners and issuers are invited to attend seminars on anti-bribery or anti-corruption from time to time. Although there is no record of the number of the Group’s suppliers and business partners to whom anti-corruption policies and procedures have been communicated, the Group has always drawn their attention by referring them to the readily available and relevant information such as HKEX’s Supplier CSR Code of Conduct or the relevant provisions requiring compliance with anti-bribery laws in standard procurement agreements or contracts or service engagement contracts.
HKEX’s community investment covering charitable donations and corporate sponsorships should be made in accordance with the Group Anti-Bribery and Anti-Corruption Policy and the Community Investment Policy. Human Resources Department and Corporate Communications Division shall respectively monitor and ensure that the donations and sponsorships made are effective.
A Group Whistleblowing Policy is in place to facilitate reporting of employees’ misconduct. The policy applies to all employees of the Group and non-employees such as consultants and contractors who are engaged by a member of the Group. Employees can contact the designated officer(s) on matters relating to inappropriate and unlawful behaviour or organisational malpractice, or if they wish, on confidential and anonymous bases, communicate directly with the chairman of HKEX Audit Committee, LME Audit and Risk Committee or LME Clear Audit Committee, without fear of reprisal or victimisation. HKEX has put in place arrangements for external parties to raised concerns in confidence. For example, clear instructions are provided on the HKEX Market website for external parties, including investors, suppliers, vendors and other third parties, to make complaints via the designated complaints hotlines.
HKEX embraces high corporate governance standards and publishes financial results on a quarterly basis. The Board has adopted a policy of providing shareholders with regular dividends with a target payout ratio of 90 per cent. HKEX, since its listing in Hong Kong, has not received any financial assistance from any governmental bodies. The Group has sponsored a defined contribution provident fund scheme for the benefits of its employees in Hong Kong and a defined contribution pension scheme for all employees of the LME Group aged over 25. Details of these schemes are disclosed in the Notes to the Consolidated Financial Statements in the annual report and on the HKEX Group website.
The Group aims to (i) continue leveraging its core competencies to achieve organic growth; (ii) evaluate business propositions in terms of costs and benefits to ensure commercial viability; and (iii) achieve sustainable profit growth through sound commercial and responsible practices. To achieve these objectives and in accordance with the initiatives identified under the Strategic Plan, the Group conducts an extensive, comprehensive annual operating budget exercise in the latter part of each year. The budget preparation process includes details consultation with individual divisions/departments as well as collective discussions with management.
Fair, Transparent and Orderly Markets
HKEX works closely with the Securities and Futures Commission (SFC), the principal regulator of Hong Kong’s securities and derivatives markets, to administer the laws governing the markets, and to facilitate and encourage the development of the markets. Bi-monthly tripartite meetings between the SFC, the Financial Services and the Treasury Bureau and HKEX are held to consider market regulatory issues and matters affecting the development of the markets. Pursuant to the Memorandum of Understanding (MOU) signed with the SFC on matters relating to market surveillance, HKEX refers cases to the SFC for it to conduct the appropriate enquiries and investigations. Since 2007, HKEX has made an annual contribution to support the Financial Reporting Council (FRC), an independent statutory body established for the purposes of conducting investigations into possible auditing and reporting irregularities in relation to listed entities in Hong Kong and enquiring into possible non-compliance with accounting requirements on the part of listed entities in Hong Kong. One of the HKEX’s Directors is appointed as a member of the FRC.
HKEX plays an active and leading role in setting and articulating corporate governance standards in the marketplace so as to secure market confidence and protect investors. The Stock Exchange of Hong Kong Limited (SEHK), a wholly owned subsidiary of HKEX, conducts regular review of the corporate governance practices of the companies listed in Hong Kong for the purpose of determining the effectiveness of the implementation of the Corporate Governance Code in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (Listing Rules). To discharge part of its regulatory function, SEHK has a Financial Statements Review Programme under which the periodic financial reports published by issuers are reviewed by sampling. The objective of the programme is to monitor compliance with the disclosure requirements of the Listing Rules and accounting standards. In order to enhance transparency and encourage high standards of financial disclosure, key findings and observations from its review are regularly released.
Product and Service Responsibility
Product and Service Development
Under the Securities and Futures Ordinance (SFO) (Chapter 571 of the Laws of Hong Kong), any amendments to the rules of the recognised exchanges and clearing houses require the SFC’s approval. Typically, prior to any new or amended rules becoming effective or the launch of any products or services, relevant information is published under the News (News Releases) section of the HKEX Market website and the News section of the LME website. Relevant information is also set out in the appropriate sections such as Listing, Products and Services sections of the HKEX Market website and under the Key Compliance Notices section of the LME website.
Before any market initiative is recommended, HKEX will consider the potential impact on relevant stakeholders and the market in general by soliciting views from the relevant Consultative Panels which comprise selected representatives of market participants and industry experts, and make reference to the practices and experience of other exchanges and clearing houses which have implemented similar initiatives. Public consultation is sought on major initiatives to collect interested parties’ views and comments which are then thoroughly analysed and considered. The responses to consultations and the consultation conclusions are posted on the HKEX Market website for the public’s information.
For the introduction of any new product or service design which requires amendments to the existing rules, regulations or procedures, formal approval from the SFC is obtained on those amendments prior to the launch. Internal briefings are conducted to ensure that employees understand the new product or service and to provide guidance on proper conveyance of the related information to market participants. Marketing materials, such as product information sheets, are compiled in accordance with the relevant guidelines issued by the SFC, eg, the Guidelines on Marketing Materials for Listed Structured Products, and approved by the SFC before publication. The profiles of HKEX’s Products and Services are available on the HKEX Market website.
Prevention of Financial Crime
HKEX has established a Group Prevention of Financial Crime Policy. The Policy applies to all employees, including temporary, contract, seconded staff and consultants of HKEX Group and all companies within HKEX Group. The Policy provides a summary of relevant legislation (including, among others, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Drug Trafficking (Recovery of Proceeds) Ordinance and the Organized and Serious Crimes Ordinance). The Policy also sets out the role of the Money Laundering Reporting Officer which includes responsibility for HKEX Group’s relevant systems, control measures (eg, customer due diligence and sanctions screening) and training, and rules for HKEX Group and their employees to follow: 1) when dealing with market participants, members or persons who have applied to become market participants or members; 2) when dealing with any person or entity which has a business relationship with any member of the HKEX Group; and 3) when suspicious transactions are identified and subsequent handling and reporting matters, including the requirement of properly recording and retaining all relevant documents for at least five years.
An HKEX Board Committee, the LME Audit and Risk Committee, the LME Clear Audit Committee have overall responsibility for the Policy standards and for reviewing the effectiveness of actions taken in response to concerns raised under this Policy.
To ensure customer satisfaction, apart from HKEX’s regular engagement with listed issuers, Exchange Participants (EPs) and Information Vendors to collect their views on HKEX's policies, products and services, HKEX adopts a comprehensive and robust approach to handling day-to-day enquiries and complaints from market participants, investors and the general public through dedicated hotlines and email communication. The hotline numbers and email addresses, as well as the policy in handling investor enquiry and complaints are posted on the HKEX Market website.
HKEX respects intellectual property rights and has a policy of not using infringing articles in its business. The General Guidelines on Compliance with Copyright Ordinance, as included in the HKEX Human Resources Manual (see Key Policies and Guidelines for HKEX Employees), outline the provisions of the Copyright Ordinance for the information of employees when discharging their duties.
Marketing communication covers all kinds of information about the Group’s products and services, information of which is set out under the Products and Services sections of the HKEX Market website, and the Trading and Metals sections of the LME website. A variety of securities and derivatives such as shares, Exchange Traded Funds, structured products, futures and options can be bought and sold through HKEX’s markets. Comprehensive pre-trade and post-trade services, primarily at the wholesale level, are also available through HKEX. A Mutual Market website is established to provide investors with updated information about the Stock Connect programme as well as convenient access to the latest information on listed companies and market movements in the stock markets of Hong Kong, Shanghai and Shenzhen.
The Group publishes news releases on the HKEX Group website and the HKEX Market website and press releases on the LME website to provide the public with updates on the Group’s activities, decisions and changes to practice and policy in a timely manner. As the frontline regulator of listed issuers, HKEX publishes regulatory news and updates as soon as practicable after disciplinary actions have been taken against listed issuers. Reports on IPO applications, delisting and suspensions are published on a monthly basis under the News (News Releases) section of the HKEX Market website. The Group also issues circular and notices to its Exchange/Clearing Participants/Members on the HKEX Market website and the LME website to inform them of new policies and procedures or changes in the Group’s products and services.
To provide user-friendly access to HKEX’s general information and covers information relating to all HKEX business functions. An Interactive Voice Response telephone system was launched in 2015 and continues in service, offering an effective communication channel for market practitioners and the investing public in addition to the written communication.
Education and roadshows are effective means of communicating the Group’s products and services to market participants and users around the world. The Group’s executives act as speakers at training courses organised by different industry associations and institutes from time to time on the Group’s products and services.
The Group strives to protect personal data from unauthorised access and abuse. The Group’s Code of Conduct sets out employees’ contractual responsibility to safeguard any confidential or sensitive information to which they have had access during their employment. Seminars on “Personal Data (Privacy) Ordinance and the latest amendments” delivered by the Office of the Privacy Commissioner for Personal Data were given to employees regularly to enhance awareness on personal or business data privacy. HKEX’s Enterprise Data Centre and Hosting Services attained ISO27001 information security management system certification for the purposes of protecting customer information and managing risks to information security effectively.
System Stability and Reliability
To maintain the stability and reliability of all major trading, clearing and settlement platforms and market data dissemination systems is of paramount importance for reinforcing investors' confidence in the Hong Kong financial markets. In addition to periodical technology and capacity upgrades and assessments by independent consultants, regular market rehearsals and business recovery drills are carried out to ensure system and market readiness before the launch of new products or services and prompt recovery from any system failover. Details of HKEX’s market systems, including information paper and technical documents on system upgrades, are available on the HKEX Market website.
A Group Information Security Policy is in place to set out the requirements for protection of the Group’s Information, IT systems and personnel, which are tightly linked to the Group’s stakeholders’ information security. The policy aims to minimise the Group’s risk exposure including unauthorised data disclosure, system outages, and personnel safety risks that could result in business or financial loss, reputational damage, legal and regulatory liabilities and personnel harm. Various control measures are put in place to reduce the risk of cyber security threats within the Group.
As HKEX and its exchanges and clearing houses are subject to Section 76 of the SFO, any introduction of new fees and amendment to fees is subject to the approval of the SFC. In accordance with a regulatory MOU signed between HKEX and the SFC in February 2001, any fee proposal submitted to the SFC must be supported by a comparison of the fees charged by exchanges and clearing houses in the United States of America, the UK, Germany, Singapore and Australia and such other markets as the SFC and HKEX may agree in a particular case. The MOU specifically states that the primary concern of the fee mechanism is to ensure that HKEX does not abuse a monopoly position by charging excess or predatory fees or by otherwise discriminating against a particular participant. Except HKEX, SEHK, Hong Kong Futures Exchange Limited, Hong Kong Securities Clearing Company Limited, The SEHK Options Clearing House Limited, HKFE Clearing Corporation Limited and OTC Clearing Hong Kong Limited, all other Group companies undertaking economic activities in Hong Kong are subject to the Competition Ordinance (Chapter 619 of the Laws of Hong Kong). HKEX has issued an internal compliance manual to provide guidance on the conduct which its employees should be aware of when acting for the non-exempt entities of the Group. The LME and the UK-incorporated subsidiaries of the Group are subject to the UK competition regulation.
Environmental, Social and Governance Reporting
In view of the growing importance of environmental, social and governance (ESG) performance and reporting globally, and the welcoming responses to the market consultation, the Exchange introduced the ESG Reporting Guide in 2012 for companies listed in Hong Kong as a recommended practice under the Listing Rules. In view of the strong market support to the proposals for the market consultation in July 2015, the Exchange has amended the Listing Rules to upgrade certain recommended ESG disclosures to “comply or explain”. The revised ESG Guide comes into effect in two phases, for financial years beginning on or after 1 January 2016 and 1 January 2017.
Following the introduction of the revised ESG Reporting Guide in December 2015, the Exchange launched a revamped ESG webpage on the HKEX Market website in March 2016 to provide practical guidance to help issuers prepare ESG reporting. Seminars and talks have been organised for listed issuers and market participants to enhance their understanding of ESG reporting and promote carbon disclosure. Representatives of the Exchange have also delivered talks at the relevant seminars organised by professional associations and other institutions.
Market Education and Financial Literacy
Investor education and financial literacy is a key component of sustainable financial markets. Understanding the potential risks associated with different financial products, such as price and liquidity risks, and having access to up-to-date and comprehensive market information are essential for making investment decisions. Information such as trading statistics, rules and regulations in respect of listing, trading and clearing, market research and survey results, help investors to understand market operations and trends. In this respect, the HKEX Market website serves as an effective platform to convey educational and regulatory information to the public, and the HKEXnews website is a dedicated issuer website which provides the investing public with convenient online access to issuers’ latest published information. Publications such as HKEX surveys and research papers are also useful materials for understanding the prevailing securities and derivatives market conditions. HKEX’s Stock Market Information Donation Programme enables the public to view market information at a number of public libraries in Hong Kong.
HKEX regularly provides educational programmes on its securities and derivatives products to EPs, conducts seminars and workshops for industry associations and retail investors, as well as provides speakers for Hong Kong Securities and Investment Institute’s educational courses. HKEX also works closely with government departments to enhance financial literacy and support educational and promotional programmes organised by professional organisations and universities.
Both the LME and LME Clear continue to engage with relevant industry bodies on matters relating to the metal industry, regulation and other issues, and continue with dialogue with end users at industry events and conferences. The LME also offers training courses about its market to stakeholders from time to time, details of which are set out under the Education & Events section of the LME website.
The Group keeps track of the key development of changes in public policies which may have significant impact on the Group’s sustainability development and strategies and the financial industry in Hong Kong. The Group takes a neutral stance in political matters and does not make donations to any political parties.
Noting the growth of the responsible investment market and its responsibility as a company with a significant amount of investment assets, HKEX has adopted the following key principles as part of its Investment Policy and Guidelines:
- HKEX regards ESG issues of companies which it invests in as important.
- When evaluating companies for investment, HKEX will include a consideration of ESG matters in the selection of investments.
- In addition, there are specific restrictions on investments in tobacco and tobacco-related industries and in HKEX shares.
Supply Chain Management and Procurement Practices
The Group engages supply chains that reflect its values and commitment. As an infrastructure provider delivering trading, clearing and settlement, depository and nominee services, and information services along the core part of the securities and derivatives transaction chains, HKEX is essentially an Information Technology (IT)-based enterprise in a capital-intensive industry. To maintain the stability and reliability of its platforms and market systems and to build HKEX into a leading global vertically-integrated multi-asset class exchange, HKEX has invested a substantial amount of resources in developing its IT infrastructure that meets international standards.
Based on the nature of its business and strategic pursuits, HKEX’s most significant suppliers are information technology and professional service providers. Other key suppliers include companies that provide services supporting HKEX’s infrastructure and human resources management, and other services such as management, security, electrical and mechanical engineering, construction and renovation, media-related and insurance. Based on the location and nature of its business, HKEX acquires the majority of goods and services from suppliers and service providers in Hong Kong except when the goods and services are not available locally. HKEX’s procurement guidelines stipulate that the selection of suppliers should take consideration of, but not limited to, price competitiveness, quality, fulfilment of specifications and logistics services.
HKEX acknowledges its responsibility to manage the social and environmental consequences of its purchasing decisions. A set of Supply Chain Management guidelines, which form part of the CSR Management System, has been developed to address the significant social and environmental impacts arising from HKEX’s key suppliers. The guidelines advocate the collection of CSR information from potential suppliers during the tendering process and the inclusion of environmental specifications for products and services in the tender invitation documents whenever applicable and economically viable. Key suppliers are provided with a CSR Information Pack and required to comply with basic CSR requirements according to HKEX’s CSR Policy, Corporate Suppliers Policy Statement and Supplier CSR Code of Conduct included in the pack where possible and appropriate when doing business with HKEX. The requirements cover legal and regulatory compliance, business ethics (including anti-corruption), community development, human rights, labour practices, and environmental protection. HKEX’s potential key suppliers will be requested to complete a CSR questionnaire to provide information on whether or not they comply with HKEX's Supplier CSR Code of Conduct, for example, whether they have any written policy covering business ethics issues such as anti-corruption, and whether they have any procedures to ensure their employees and service providers adhere to such business ethics policy and business ethics legislation. The completed CSR questionnaire will be used for evaluation of the potential key suppliers’ CSR performance. HKEX’s key suppliers and business partners are invited to attend seminars organised by HKEX on various CSR-related topics as part of its stakeholder engagement programme.