Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when such shareholdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organizations for this market, within the time-frame required. If you have any questions regarding this issue we encourage you to consult your legal counsel.
Failure to comply with the reporting requirements in this market may lead to penalties and / or other sanctions.
All holdings in excess of 5% or more of the voting shares of the company, when a holding falls below 5%, and subsequent changes of 1% (increase or decrease) must be disclosed by the beneficial owners to the issuer and the SEHK within three business days.
Failure to settle in CCASS may result in fines, compulsory stock borrowing or buy-ins imposed by the HKSCC on SD+1. Under continuous net settlement, short positions at close of business on T+2 will be subject to a buy-in at 10:00 (local time) on T+3, unless an exemption is granted.
A broker who erroneously oversells a securities position can apply to the Hong Kong Securities Clearing Company Ltd. (HKSCC) to effect a buy-in transaction on T+1 or T+2, rather than wait for HKSCC to perform a compulsory buy-in on T+3.
Charges: The party in default shall be responsible for any difference in price resulting from the buy-in and all incidental expenses, including a 0.25% buy-in penalty imposed by HKSCC.
A new investor compensation scheme has been introduced by the Securities and Futures Commission (SFC), which replaces the previous two schemes that were The Unified Exchange Compensation Fund (UECF) and the Commodity Exchange Compensation Fund (CECF)
The new investor compensation scheme is based on a per-investor compensation limit of HKD 150,000 for trading securities and futures contracts respectively. It protects investors who suffer loss through intermediary default. The coverage has been extended to a much broader range of intermediaries, including both exchange and non-exchange participants, banks and securities margin financiers. Brokers receive coverage from the Brokers’ Fidelity Insurance Scheme and the Fidelity Fund and Guarantee Scheme. The new investor compensation scheme is mainly for retail investors, most institutional investors are excluded from the scheme.
The Stock Exchange of Hong Kong Limited ("HKEx") had announced that The Securities and Futures (Investor Compensation – Levy) (Amendment) Rules 2005 ("Amendment Rules") would come into effect on October 28, 2005. According to the Amendment Rules, The Securities and Futures Commission ("SFC") would issue an exemption notice suspending the payment of the levy if the net asset value of the compensation fund exceeds HKD 1.4billion. If the net asset value of the ICF falls below HKD 1 billion, SFC will terminate the exemption notice and reinstate the levy.
However, as the current net asset value of the ICF has already exceeded HKD 1.4 billion, SFC has issued an exemption notice and the Investor Compensation Levy has been suspended with effect from December 19, 2005. In the past, investors were required to pay investor compensation levies at 0.002% on each side of securities transactions executed on the Stock Exchange of Hong Kong and HKD 0.5 (0.1 for smaller size contracts) per side of a contract on futures transactions executed on the Hong Kong Futures Exchange.
Money laundering prevention is one of the core responsibilities and Know Your Customer (KYC) is a fundamental principle of all AML controls. The sub-custodian’s control procedures for AML comply with the Hong Kong Monetary Authority (HKMA)’s requirements.
Before starting a new business relationship, the following KYC information must be obtained:
- Full customer identification evidence;
- The reason for the relationship, stated in sufficient detail to provide a clear understanding of the purpose of the account and the nature of the customer’s business or employment;
- An indication of the anticipated volume and type of activity to be conducted across the account; and
- Our understanding of the source of funds passing through the account. For certain types of customers, it will also be appropriate to record the underlying source of wealth.
On top of the above information, some basic documents are also required from the new customer, including:
- Board resolution for account opening;
- Memorandum & Articles of Association;
- Certificate of Incorporation;
- Business Registration Certificate