Question regarding HSBC’s dividend cancellation reaches HK Legislative Council

Maria Nikolova

“We believe that the dividend policy and arrangements of individual listed companies would not affect the overall competitiveness of Hong Kong’s securities market”, Hong Kong’s Secretary for Financial Services and the Treasury says.

The decision of HSBC Holdings plc not to pay its fourth interim dividend in respect of 2019 has sparked an angry reaction among Hong Kong investors, with the matter reaching the Hong Kong Legislative Council.

The Secretary for Financial Services and the Treasury, Mr Christopher Hui, today issued a written reply in the Legislative Council to question by the Hon Holden Chow.

Let’s recall that, in February 2020, the Board of HSBC announced that its fourth interim dividend in respect of 2019 would be paid on April 14 this year and the ex-dividend date would be February 27. On March 31, HSBC announced that in response to the request of the regulatory authority in the United Kingdom, it had decided to cancel the said dividend payment which had been announced. It also decided that it would not make any quarterly or interim dividend payments until the end of this year. Some minority shareholders of HSBC are of the view that HSBC’s cancellation of the dividend payment already announced is unethical and has undermined investors’ confidence in the stock market.

The Government was asked to inform the Council whether the authorities “(i) will urge HSBC to have regard to the economic situation and the interest of minority shareholders in Hong Kong and reconsider its decision of not making dividend payments, and (ii) have assessed the impacts of the cancellation of dividend payments by HSBC on the economic situation in Hong Kong and investors’ confidence in the stock market; if they have assessed, of the outcome; if not, whether they will make such an assessment?”

The official reply says that “dividend policy and arrangements of listed companies are commercial decisions of the respective companies’ Board having regard to a range of considerations”.

The Government official explains that dividend arrangements of listed companies should comply with the requirements as stipulated in the company law of their respective jurisdiction of incorporation as well as their articles of association. Banks incorporated in the United Kingdom (including HSBC) are regulated by the Prudential Regulation Authority under the Bank of England and they are required to comply with its relevant requests.

In Hong Kong, the HKMA has requested the Hong Kong branch of HSBC to reflect the concerns expressed by its shareholders in Hong Kong to HSBC. The HKMA has also informed the Prudential Regulation Authority about the concerns expressed by HSBC shareholders in Hong Kong through HKMA’s regular regulatory communications with the Prudential Regulation Authority. In addition, the SFC will perform its statutory regulatory functions in accordance with the Securities and Futures Ordinance and take necessary action if any non-compliance with Hong Kong’s regulatory requirements is detected or to make any public comment or announcement.

“Since the shareholders of listed companies such as HSBC generally come from different jurisdictions and may opt for different dividend options (such as receiving cash dividend or scrip dividend), it is difficult to assess the impact of HSBC’s dividend cancellation on the economic situation and investors’ confidence in Hong Kong. But on the whole, we believe that the dividend policy and arrangements of individual listed companies would not affect the overall competitiveness of Hong Kong’s securities market”, Mr Christopher Hui says.

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