XN000022-1997-01-15 — Page 34

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(b)

(c)

Answer:

the results of any evaluations conducted by SEHK or SFC on the impact of their preventive actions; and

the respective number of cases involving corporate fraud and mismanagement reported to SEHK and SFC monthly since January

1995?

The statutory framework on corporate governance is provided under a number of ordinances, including

the Securities (Disclosure of Interests) Ordinance (Cap. 396) which obliges directors and substantial shareholders to disclose their interests in shares of the company;

the Securities (Insider Dealing) Ordinance (Cap. 395) which governs the use of price sensitive information; and

the Companies Ordinance (Cap. 32) which deals with the reporting of unfit directors by liquators of companies being wound up.

In addition, the corporate governance framework is strengthened by the Takeovers Code issued by the Securities and Futures Commission (SFC) which obliges directors to consider the interest of their shareholders in takeovers, and the Listing Rules issued by the Stock Exchange of Hong Kong (SEHK) which set out the compliance requirements.

Specifically, section 29A of the Securities and Futures Commission Ordinance empowers the SFC to investigate cases of suspected fraud, misconduct or inadequate disclosure to shareholders in relation to listed companies. It also empowers the SFC to inspect listed companies' books or records and if the inspection reveals impropriety, to apply to the High Court for orders including injunction against directors and the appointment of a receiver to the listed companies concerned. In 1995 and 1996, the SFC invoked these powers on five occasions.

The SEHK is the front line regulator of corporate activities. Under the Listing Rules, companies are required to sign listing agreements before they are listed on the SEHK. One of the major corporate governance initiatives of the SEHK is the education of listed company directors of their fiduciary duty and duty of care owed to the company. This message has been reinforced through the SEHK's publications, conferences and public statements, the work of four SEHK-sponsored working groups on corporate governance, and through enforcement of the Listing Rules.