Disclosure Requirements - Hong Kong

02.12.2016

Disclosure Category: 2

Clearstream Banking S.A (CBL) may be required, under the terms of the Securities and Futures Ordinance (the “Ordinance”), Section 329, to disclose, upon request, to issuers of securities listed in Hong Kong, the identity and holdings of customers.

CBL may be required, under General Rules of CCASS section 824 (Charter 8), with HKSCC as the nominee holder, to disclose, upon request to relevant China authority/ChinaClear on listed Mainland China shares via the Stock Connect programme, the identity and holdings of customers.

Consent

Customers holding shares tradable in Hong Kong and/or via the Stock Connect programme, consent and are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, the listed company or its agent) as their attorney-in-fact, under power of attorney, to collect from CBL such information as is required to be disclosed. Customers who do not want to grant such authority to CBL should refrain from holding such shares in their account with CBL.

Disclosure requirements

A shareholding that reaches 5% must be disclosed to the HKEx and to the listed company within three business days (including Saturday) after the day on which the duty to disclose arose. Any subsequent change must also be so notified.

In addition, customers are advised that local laws and regulations in Hong Kong (including the Ordinance, Section 329) may require CBL to disclose securities trading and holding information and the identity of the final beneficial owners of certain securities.

In order to comply with such legislation, customers safekeeping corporate securities and related derivative instruments that are listed in Hong Kong are required to disclose beneficial owner details upon request. Listed companies may request such information directly from local custodians and account holders or may appoint an agent to manage such requests.

The nature and time frame for the disclosure will be in accordance with the terms of the request.

A shareholding that reaches 5% of a listed Mainland China incorporated company's shares, held and controlled domestically and overseas issued on an aggregate basis through Stock Connect, QFII/RQFII or other investment channels, must disclose in writing to the CSRC and the relevant PRC Exchange, and to the listed company within three business days. Any subsequent change in such holdings by 5% will require further disclosure to be made within 3 days.

If an investor holds a listed Mainland China incorporated company's shares that has H-shares listed on the SEHK and is interested in more than a certain threshold (as may be specified from time to time) of any class of voting shares in such Mainland China incorporated company, the investor is under a duty of disclosure pursuant to Part XV of the SFO.

It is the investor's responsibility to ensure that the required disclosure has been made by the investor and customers must accept full responsibility for the consequences if such disclosure is not made.

Background and legal basis

Sections 310 and 324 of the Ordinance set out the legal framework for holders of securities listed in Hong Kong to disclose significant shareholding interests. Section 329 of the Ordinance outlines the power of a listed corporation to investigate ownership of interests in its shares.

Article 13 of the Certain Provisions on Shanghai-Hong Kong Stock Connect Pilot Program (the "CSRC Stock Connect Rules") and the SSE China Connect Rules (Articles 34 and 36) establish the rules for holders of Mainland incorporated company's shares listed in both China and Hong Kong on the disclosure of interests obligation. The same disclosure rules apply to Shenzhen-Hong Kong Stock Connect.

Obligation to report threshold crossings

The acquisition of 5% and/or more of any company listed in Hong Kong requires that the shareholding be disclosed, with the obligation to report falling upon the beneficial owner; that is, the party eligible to vote.

Reports must be sent via any of the following means:

Mail:Primary Market Information, E-Business and Information Services, Hong Kong Exchanges and Clearing Ltd, GPO Box 10023, Hong Kong
Fax:+852-2845-6328
Electronic filing:http://www.hkexnews.hk/di/di.htm
Website:http://www.sfc.hk/web/EN/rule-book/sfo-part-xv-disclosure-of-interests/

Under Section 329 of the Ordinance, bare trustees and exempt custodians are not required to report interests in securities unless requested by the listed company. It remains the duty of beneficial owners of shares to disclose their notifiable interests.

Sanctions

It is a criminal offence, under penalty of a fine of up to HKD 100,000 or up to two years imprisonment, for a person to fail, without reasonable grounds, to fulfil the obligation to make a disclosure.

For Stock Connect, CSRC may adopt the following regulatory measures, depending on the violation:

  • Order for corrective action;
  • Regulatory dialogue;
  • Issue of warning letters;
  • Record in the creditworthiness database the details of the offense or the failure to perform the public undertaking and make a public announcement;
  • Blacklist the offender as an inappropriate candidate;
  • Adopt any other regulatory measure pursuant to law.