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In 2002, the Hong Kong Stock Exchange released a consultation paper with proposals for continued listing eligibility for ''penny'' stocks. A panic sell-off ensued as investors believed that they were about to lose both the marketplace for their shares and also the protection of the listing rules. In one trading day, roughly 10% of the market capitalisation for microcaps was wiped out. What went wrong? Was this related to the Exchange''s status as a for-profit entity following its demutualisation? To shed investor scepticism about the quality of listed companies and to ensure its competitiveness with other financial centres, Hong Kong sorely needs better rules to promote market transparency and better corporate governance.