Loophole of DoI System

Under the disclosure of interests (DoI) regime laid down in SFO, substantial shareholders (5% stake or above) of a listed company should make a disclosure for certain prescribed changes of interest (e.g. crossing a whole percentage number) within 3 business days, which is tighter than 5 days required by the Pre-SFO regime. The law permits such disclosure to be made by hand, post, fax or email. However, there is an underlying loophole.

In recent months Warren Buffet has gradually reduced his shareholdings in PetroChina (857.hk), triggering the disclosure obligations. However, he sent in the disclosure by regular mail, each time leaving Hong Kong investors in the dark for two weeks.

According to newspaper reports, even Martin Wheatley (SFC's CE) had to admit that:

• There is clearly a gap in our legal system.
• It was never intended that somebody could send their disclosure in by a very slow means of communication.
• It is allowed for in the SFO, but it's a deficiency we need to address.
• It will take time to amend the law because it requires primary legislation changes.

I wonder how many other substantial shareholders (esp. overseas investors not regulated by SFC) are taking advantage of this loophole.