Hong Kong Securities & Futures Ordinance
The Securities and Futures Ordinance is the primary piece of legislation regulating Hong Kong’s securities and futures markets. Its scope is wide; ranging from regulating the conduct of listed companies and financial intermediaries to providing standards for the authorisation of, and regulating offers of, investment products.
The primary areas on which we advise include:
- the disclosure of interests regime requiring disclosure of share and debenture holdings and other interests in Hong Kong listed companies
- the licensing regime for financial service sector companies wishing to conduct business in Hong Kong
- the regime governing offers of investment products in Hong Kong
- the prohibitions on insider dealing and other market misconduct in relation to Hong Kong listed securities
The Securities and Futures Commission (SFC) was established in 1989 and is an independent statutory body set up to regulate the securities and futures markets in Hong Kong.
The Securities and Futures Commission derives a board range of investigation, remedial and disciplinary powers from the Securities and Futures Ordinance (SFO) and a subsidiary legislation. The Securities and Futures Commission works to ensure orderly securities and futures market operations, to protect investors and help promote Hong Kong as an international financial centre and a key financial market in China. The SFC is funded by levies on transactions conducted on the Stock Exchange of Hong Kong and the Hong Kong Futures Exchange, as well as fees charged to those who apply for and hold licenses with us or who make other types of application for licences.
The Securities and Futures Ordinance has vested the Securities and Futures Commission with multiple roles, chiefly to strike a balance among the interests of industry participants, market players and the community in general, More precisely, the scope of work the Securities and Futures Commission is involved in includes setting and enforcing market regulations such as investigating breaches of rules and market misconduct and taking appropriate enforcement actions. In particular, the Securities and Futures Commission is involved in licensing and supervising intermediaries seeking to conduct regulated activities for which the Securities and Futures Commission has regulatory responsibility, such as brokers, investment advisers and fund manners. The Securities and Futures Commission also participates in supervising market operations including exchanges, clearing house and alternative trading platforms and helping to enhance market infrastructure and authorising investment products and/or offering documents prior to their distribution to retail investors. In a bigger perspective, the Securities and Futures Commission oversees regulations governing takeovers and mergers of public companies and The Stock Exchange of Hong Kong’s regulation of listing matters whilst cooperating with and providing assistance to local and overseas regulatory authorities and helping investors understand market operations, the risk of investing and their rights and responsibilities.
Disclosure obligations under Part XV of the SFO in the event of a listing Part XV of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (SFO) relates to the obligation of substantial shareholders and directors of a listed corporation to make disclosure filings to the Hong Kong Stock Exchange and notify the listed corporation in connection with interests held by them. Such duty of disclosure arise for substantial shareholders and directors of a company which is being listed, and the relevant disclosure filings is referred to as “Initial Notification”.
Exemptions Certain interests are exempted from disclosure under Part XV of the SFO. These will not be discussed in deal in this note save to note that, inter alia, the following interests may be exempted from disclosure obligations:
- interests of a beneficiary of a discretionary trust (unless s/he is also a director of the listed corporation)
- interests of bare trustee who has no authority to exercise discretion in dealing in the interests in shares or rights attached thereto
- “exempt custodian interests” where the relevant shares are held by a corporation which carries on a business of holding securities in custody for another person, whether on trust or by contract, and that corporation has no authority to exercise discretion in dealing in the interest in shares or the rights attached thereto
- interests in shares of holder of a unit or a share in the scheme, a trustee or custodian of an authorised collective investment scheme, certain pension or provident fund schemes, and a qualified overseas scheme
- “exempt security interests” where the relevant interests are security interests held by qualified lenders (i.e. authorised financial institution, exchange participant of a recognised exchange company, authorised insurance company and intermediary licensed to deal in securities or margin financing) only for the purposes of a transaction entered into in the ordinary course of its business