HKSI Paper 5 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

SFO commencement date

The Securities and Futures Ordinance (Cap. 571) took effect on 1 April 2003, consolidating the former Securities Ordinance, Commodities Trading Ordinance and Protection of Investors Ordinance into a single regulatory statute.

Number of regulated activities

The SFO defines ten regulated activities, numbered Types 1 to 10, ranging from dealing in securities and futures to asset management and credit rating services; a licence is needed for each activity carried on.

Type 6 regulated activity

Advising on corporate finance, covering advice on the Listing Rules, the Takeovers Code and the Companies Ordinance, including advice on offers, mergers, acquisitions and share issues.

Sponsor two-month rule

A sponsor must be formally appointed at least two months before an IPO applicant submits its listing application (Form A1) to the Exchange, allowing time for due diligence before filing.

Main Board profit test

Requires profit of at least HK$35 million in the most recent year and an aggregate of HK$45 million across the two preceding years, with a minimum market capitalisation of HK$500 million at listing.

Public float requirement

At least 25% of a Main Board issuer's total issued share capital must be held by the public at listing; a lower 15% applies where market capitalisation exceeds HK$10 billion.

Listing Committee composition

The Listing Committee has 28 members, including a Chairman and two Deputy Chairmen, appointed by the HKEX Board, and is the governing body for the Exchange's listing function.

Listing Review Committee

A body that hears appeals against decisions of the Listing Committee; further appeal may lie to the HKEX Board and, in certain cases, to the Securities and Futures Appeals Tribunal.

Dual filing regime

Requires an IPO applicant's listing document to be filed with both the SFC and the Exchange, giving the SFC statutory power to object to a listing application under section 6 SFO.

IPO clawback tiers

If the public tranche is oversubscribed, shares move from the placing tranche: 20% at 15 times or more, 30% at 50 times or more, and 40% at 100 times or more.

Results announcement deadlines

A Main Board issuer must publish annual results within three months of its financial year end and interim results within two months of the half-year end, under the Listing Rules.

Major transaction threshold

A notifiable transaction with a percentage ratio of 25% or more but less than 100% is a major transaction, requiring shareholders' approval and a circular within 45 days of announcement.

Mandatory offer trigger

Rule 26 of the Takeovers Code requires a general offer when a person acquires 30% or more of a company's voting rights, or adds more than 2% while holding between 30% and 50%.

Takeovers Code offer period

An offer must stay open for at least 21 days and no more than 60 days, and the offer document must be published within 21 days of the announcement of a firm intention.

Companies Ordinance Cap. 622

The Companies Ordinance in force since 3 March 2014 governs incorporation, share capital, directors' duties, accounts and audits, and abolished par value and authorised share capital.

Annual return filing deadline

A private company must file its annual return with the Companies Registry within 42 days of the anniversary of its incorporation date each year.

Buy-back general mandate

Shareholders normally authorise at the annual general meeting an on-market buy-back mandate limited to 10% of the issued share capital, alongside a 20% mandate to issue new shares.

Placing price benchmark

A placing of new shares must be priced at not less than the higher of the closing price on the placing agreement date and the average closing price over the preceding five trading days.

Definition of inside information

Specific information about a listed corporation that is not generally known to the market and would, if generally known, be likely to materially affect the price of its securities.

Market Misconduct Tribunal sanctions

The MMT may impose disqualification orders, cold shoulder orders, cease and desist orders and fines of up to HK$10 million for civil market misconduct such as insider dealing.

SFC disciplinary fine cap

For licensed persons, the SFC may fine up to the greater of HK$10 million or three times the profit gained or loss avoided by the misconduct.

Responsible officer minimum

A licensed corporation must have at least two responsible officers, at least one of whom is an executive director available at all times to supervise the regulated activity.

GEM financial eligibility

GEM applicants need a two-year trading record, minimum market capitalisation of HK$150 million at listing, and two years of management continuity under the GEM Listing Rules.

Sponsor declaration content

The sponsor declares it has completed all reasonable due diligence, except matters that can only be addressed later, and has a reasonable basis to believe the listing document is accurate.

SFC objection power

Under section 6 SFO the SFC may object to a listing application, and the Listing Rules require SFC approval before amendments to the Listing Rules take effect.

Stabilisation period

Under the Securities and Futures (Price Stabilising) Rules, a stabilising manager may support the price of shares for up to 30 days after the listing date.

Continuing connected transaction cap

Continuing connected transactions need an annual cap, independent shareholders' approval, and annual review by independent non-executive directors and the auditors under Chapter 14A.

Acting in concert

Persons who cooperate to obtain or consolidate control of a company are treated as one person under the Takeovers Code, with presumptions set out in the Code.

Court-free capital reduction

A company may reduce share capital without court approval using a solvency statement made by all directors, under the Companies Ordinance Cap. 622.

Rights issue minimum period

A rights issue must be offered pro rata to existing shareholders and remain open for acceptance for at least 14 days under the Listing Rules.

Part XIVA disclosure duty

A listed corporation must disclose inside information to the market as soon as reasonably practicable, and must maintain a written inside information policy and procedures.

Section 214 disqualification

The SFC may seek court orders disqualifying directors for up to 15 years for misfeasance or misconduct in the management of a listed corporation.