The Rise of Regtech: How Technology is Changing Investor Relations and Company Secretarial Services

February 22, 2021

Whether it is the Companies Ordinance (Cap. 622), Securities and Futures Ordinance (Cap. 571) or HKEX Listing Rules, it can be challenging to stay up to date on all the rules, timelines and disclosure requirements needed to stay in compliance with local ordinances and regulations.

As a company director or secretary, you are responsible for submitting, maintaining, and ensuring the timely filing and accuracy of an increasingly complex web of different regulatory documents. However, according to the Companies Registry ("CR"), in the first nine months of 2020, 2,066 companies in Hong Kong were fined a total of HK$8,380,850 for various types of failure to file or the late filing of disclosures.

To avoid falling foul of company regulations, many companies engage a professional service provider (e.g. corporate secretary or share registrar) to help advise, monitor, and navigate compliance requirements on their behalf.

The Digital Angle

With recent advancements in high-speed internet, data warehousing, and analytics capabilities, many large financial institutions have already embraced e-banking platforms and digital solutions to enhance customer experience and streamline operations. This has given rise to the current fintech revolution, which has spawned many sub-categories, such as mobile payments, cryptocurrency trading and insurtech.

Of particular relevance to company directors and secretaries is a category of services known as regtech, a term first coined by the UK Financial Conduct Authority ("FCA") in 2015. It is a “subset of fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.”

Regtech represents an opportunity to reinvent, simplify, and enhance the compliance function by enabling remote filing, automation, and big-data analytics.

Register of Members and Company Ownership Records

Other than sole proprietorships or other unincorporated enterprises, almost all legal entities are required by law to maintain a register of members, list of directors, and other evidence of share ownership. Keeping records of these entities can be especially complex when it comes to large group companies or listed firms with a database of up to several hundred individuals or other businesses.

In the past, these records were stored away in stacks of physical binders, with copies kept by multiple parties. Accuracy relied on a combination of physical and electronic correspondence that was prone to human error and hard to maintain.

With digital record-keeping, it is now possible for companies to manage and access data in real-time, acting as a single source of evidence for all parties involved.

Company managers can also now perform real-time analytics of these records, giving them an even more in-depth understanding of their share-ownership demographics and preferences.

Ownership Analysis and Investor Roadshows

Regulatory disclosures of listed companies present a huge source of valuable information that can give analysts and investor-relations teams an incredible understanding of a particular business or industry. With the right digital tools, it is now possible for companies to quickly identify then consolidate and visualize big data into actionable insights and competitive market intelligence.

For example, under Part XV of the Securities and Futures Ordinance (Cap 571), substantial shareholders are required to disclose interests in shares of listed companies. Changes in ownership over time can be indicative of insider sentiment in a company or even provide valuable insights regarding the overall industry outlook.

Companies looking to do fundraising roadshows can also use this type of information to perform investor targeting, ensuring that they can actively engage with the right fund managers or potential investors who have shown interest in similar or adjacent industries.

All of this information ensures that Investor Relations teams can not only focus their efforts in areas that provide the best return on investment, they can also keep their finger on the pulse and better manage shareholder/investor expectations with their unique insights into the market.

Corporate Events and Blackout Periods

Managers of listed companies will know that navigating the timelines for key event dates and blackout periods can be a challenging endeavor. Not only does it require a solid understanding of listing rules and different application scenarios, but company managers must also be keenly aware of operational deadlines. This includes notification to the directors and chief executives, printing and dispatch of the relevant circulars/notices and agenda, or ensuring that venues are booked for key events. Any changes could have a cascading effect, putting the company at risk of non-compliance.

With the use of intelligent calendars that are custom-built for such purposes, company managers can not only use it to test different timeline scenarios dynamically, they can also use this tool to set reminders for critical dates and as a communication tool amongst stakeholders to represent a single source of information for managing corporate events.

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