The Securities and Futures Bill, gazetted in November 2000, seeks to consolidate and reform 10 ordinances now regulating the Hong Kong securities and futures market. The proposed legislation seeks to increase the transparency of securities dealings, tighten restrictions against market manipulation, and improve the operations of market participants, therefore bringing Hong Kong securities legislation in line with those of key international financial centres. Not surprisingly, disclosure of interests in shares of Hong Kong listed companies is one main area of change. Major amendments proposed include the following:
The initial shareholding (interests in any class of issued share capital carrying voting rights) disclosure threshold will be reduced from 10% to 5%. The disclosure notification period will be shortened from five to three business days.
Disclosure by substantial shareholders on consideration payable or receivable in connection with acquisitions or disposals of interests in shares will be required. Changes in the nature of interests in shares will need to be disclosed.
Settlors of discretionary trusts will be deemed interested in shares held by the trust if they retain a power to influence the discretion of trustees.
The existing disclosure exemptions given to locally registered investment managers and trust companies will be removed.
"Concert party agreements" will be extended to include arrangements under which controlling shareholders/directors of a listed company provide loans or security for loans to another knowing that such will be applied to acquire an interest in the share capital of the company.
Interests in equity derivatives and short positions in shares under certain circumstances will also require disclosure. Netting-off between long and short positions for determining the percentage level of notifiable interest will not be permitted.
The Bill has been the subject of intensive comment from different market players. It is expected that the legislation in its final form will be the product of balancing the interests of the investing public on the one hand and the need, on the other, to prevent resulting compliance costs from spiralling.