HKSI Paper 5 key terms

Hong Kong's principal statute regulating securities, futures and leveraged foreign exchange markets; it establishes the SFC, the licensing regime, offer-of-investments rules, market misconduct provisions and the Takeovers Code's statutory backing.

Hong Kong's statutory regulator of the securities and futures industry, responsible for licensing intermediaries, supervising listed-company disclosures, investigating market misconduct and enforcing the SFO.

A company granted an SFC licence to carry on one or more regulated activities; it must maintain fit-and-proper standards, capital and liquidity requirements, and comply with the Code of Conduct.

One of the categories of business defined in Schedule 5 of the SFO, such as dealing in securities, advising on securities, or corporate finance advice, which requires an SFC licence when carried on in Hong Kong.

SFC licence for advising on corporate finance, covering advice on Listing Rules compliance, takeovers, share issues and other corporate transactions; a common licence held by sponsor and financial adviser staff.

An individual approved by the SFC to supervise a licensed corporation's regulated activity; at least two must be appointed for each regulated activity, with at least one available at all times.

The SFC's assessment of whether an applicant or licensee has the financial soundness, competence, integrity and compliance record expected of the industry, applied to individuals and corporations.

A licensed firm appointed by a listing applicant to perform due diligence, guide the applicant through vetting and make a declaration to the Exchange that the applicant is suitable for listing.

A formal statement filed with the listing application in which the sponsor confirms it has performed reasonable due diligence and that, in its opinion, the applicant is suitable for listing.

A sponsor appointed to coordinate all aspects of an initial public offering, including liaising with the Exchange, underwriters and other advisers; at least one must be appointed for a main board IPO.

The investigation a sponsor or adviser must conduct into a listing applicant's business, assets, liabilities, management and prospects so that statements in the listing document are accurate and complete.

The rules issued by the Stock Exchange of Hong Kong governing eligibility, application, disclosure, continuing obligations and transaction classifications for listed issuers and applicants.

The primary market of the Stock Exchange of Hong Kong for larger, more established issuers, with higher profit, revenue or market-capitalisation thresholds than GEM.

The Growth Enterprise Market, a board of the Stock Exchange of Hong Kong for smaller and growth companies, with lower entry thresholds and additional continuing obligations such as a sponsor requirement.

A committee of the Stock Exchange that decides listing applications, interprets the Listing Rules and hears disciplinary matters; its decisions are subject to review by the Listing Review Committee.

An independent committee that hears appeals against Listing Committee decisions on listing applications and disciplinary sanctions, providing a check on the Exchange's rule-making role.

The first sale of shares by a company to the public, coupled with an application for listing; in Hong Kong it requires a listing document, sponsor appointment and Exchange vetting.

The prospectus or equivalent document issued for a public offer of shares, containing prescribed disclosure on the issuer's business, financials, risks, management and use of proceeds.

A document registered under the Companies Ordinance that offers shares to the public; it must contain the disclosures required by that Ordinance and the Listing Rules and be authorised for registration.

A Main Board eligibility route requiring a trading record of at least three financial years and prescribed aggregate profit, with the most recent year meeting a higher threshold.

An alternative Main Board eligibility route for issuers that cannot meet the profit test, requiring prescribed revenue, market capitalisation and cash-flow or revenue thresholds.

A person entitled to exercise, or control the exercise of, 30% or more of the voting power at general meetings, or who can control the composition of the board; subject to lock-up and disclosure obligations.

A defined category including directors, chief executives, substantial shareholders, their associates and certain subsidiaries, whose dealings with the listed issuer trigger connected transaction rules.

A transaction between a listed issuer and a connected person that requires announcement, independent shareholder approval and, in some cases, an independent financial adviser's opinion under the Listing Rules.

A transaction classified by size tests as discloseable, major or very substantial, each triggering escalating requirements for announcement, circular and shareholder approval.

A percentage-ratio calculation (assets, profits, revenue, consideration or equity capital) used to classify a transaction and determine the applicable announcement, circular and shareholder-approval obligations.

An SFC-licensed adviser independent of the issuer and relevant parties, appointed to give shareholders an opinion on transactions such as connected transactions, takeovers or major disposals.

The SFC's code governing mergers, takeovers and share buy-backs of Hong Kong public companies, covering mandatory offers, offer periods, disclosure of dealings and equality of treatment.

An obligation to make a cash offer for all shares of a company once a person acquires 30% or more of the voting rights, or increases an existing holding between 30% and 50%.

A Takeovers Code principle under which an acquisition of control of a company can trigger a mandatory offer obligation for a downstream listed company whose shares are effectively controlled.

Hong Kong's companies statute governing incorporation, share capital, capital reductions, buy-backs, directors' duties, accounts and prospectus registration.

A company's purchase of its own shares, permitted under the Companies Ordinance and the Listing Rules subject to shareholder mandate, price limits and disclosure requirements.

A shareholder resolution authorising directors to issue new shares, or repurchase shares, up to a stated percentage of issued capital, typically refreshed annually at the AGM.

An offer of new shares to existing shareholders in proportion to their holdings, usually at a discount; it requires shareholder approval unless made under a general mandate.

The sale of new or existing shares to selected investors rather than to the public, subject to Listing Rules requirements on mandate, pricing and shareholder approval.

Specific information about a listed issuer that is not generally known and would, if known, materially affect its share price; disclosure is required as soon as reasonably practicable under the SFO.

Prohibited conduct under the SFO including insider dealing, false trading, price rigging, disclosure of false or misleading information and stock market manipulation, enforceable by the SFC and the Market Misconduct Tribunal.

A statutory tribunal chaired by a judge that hears SFC proceedings alleging market misconduct and can impose disqualification, cold-shoulder and other civil sanctions.