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The Securities and Futures Ordinance was enacted in March 2002 and is widely expected to come into force by April. The SFO is a major piece of legislation, consolidating and superseding 10 primary pieces of current legislation relating to securities and futures.
There are many regulatory changes introduced by the SFO which potentially effect derivatives players. However, arguably the area which may cause greatest change relates to the new disclosure of interests requirements.
Disclosure Of Interests
Part XV of the Securities and Futures Ordinance will replace the disclosure of interests regime under the Securities (Disclosure of Interest) Ordinance (Cap. 396) and introduces two parallel regimes: disclosures required of substantial shareholders (which relates to both corporates and individuals) and disclosures required of directors or chief executives of corporations with securities listed in Hong Kong. Part XV is an extremely detailed piece of legislation.
Here we attempt to provide an overview of features of the substantial shareholder disclosure regime of particular interest to the derivatives industry.
The new regime has three main components:
* disclosure of interests
* disclosure of short positions
* disclosure of changes in nature of interests
each of which is relevant when your aggregate interests in shares in a company with securities listed in Hong Kong reach or exceed 5% of the total issued share capital of that company. Disclosure has to be made to the company and the Hong Kong Stock Exchange.
There is no territorial limit: if you fulfil the criteria a reporting obligation will apply to you wherever you are located. The key feature for the derivatives industry is that equity derivatives which relate to shares in Hong Kong listed companies are a component in each of the three reporting areas (interests, short positions and changes in nature of interests).
"Interests" In Shares
Interests in shares are very widely defined to include interests "of any kind" (for example, a person who enters into a contract for the purchase of shares is taken to have an "interest" in those shares even before delivery and change in title), the limits being prescribed largely by the use of exemptions. In calculating his total aggregate...