SFC consults further on proposed amendments for implementing an uncertificated securities market

In view of the gradual introduction of an Uncertificated Securities Market (USM) regime under which investors will be able to hold securities in their own names (legal title), but yet without paper (please see relating EventID 6244 and EventID 20477), the Securities and Futures Commission of Hong Kong, SFC, has launched a new consultation in this context. Specifically, the Commission seeks feedback on proposed revisions to the Code of Conduct for Share Registrars and the Guidelines for Electronic Public Offers to make necessary adjustments as to the requirements of share registrars and the requirements relating to electronic public offers. Latter is defined as an IPO „where the Internet (or other electronic means) is used to display or provide access to prospectuses, applications forms and/or to collect applications or application instructions from the public (applicants) during an initial public offering or a follow-on public offering“.
In detail, the Commission proposes the following key amendments to the „Code of Conduct for Share Registrars“:
– The code will be renamed into „Code of Conduct for Approved Securities Registrars“ as a new approval scheme for share registrars will apply.
– Three new general principles will be introduced to address specific issues relating to the approved share registrar (ASR) function, namely the outsourcing of the ASR, standards expected of ASRs‘ computer systems and facilities, emphasizing cybersecurity and authenticated messages, and the disclosures to be made to issuer-clients and users of an ASR’s service facility.
– Some principles will be modified for example to expand the conflict of interest requirements of ASRs, clarify the appropriateness of fees that may be charged by an ASR, or defining new complaints handling requirements of ASRs.
– The Commission proposes to add two new schedules to lists the fees and charges with potential upper limits that may be charged by ASRs and to expand „on ASRs’ obligations when performing functions for issuer-clients.
The key proposed revisions to the „Guidelines for Electronic Public Offers“ are as follows:
– The guidelines will be renamed into „Guidelines for Electronic Public Offers“.
– Provisions related to the paper-based IPO process will be deleted as they are no longer relevant.
– Paragraphs 2.6.2 and 4.2 will be updated to accommodate the growing use of mobile apps for accessing IPO documents and submitting IPO applications.
Generally speaking, the existing guidelines, which date back to 2003, are being updated to better align with current market practices which involve electronic IPO processes including subscriptions and prospectuses.
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Finally, the SFC proposes aligning changes to the Stamp Duty Ordinance to streamline the stamping and collection of stamp duty on contract notes and to the Electronic Transactions Ordinance to clarify certain aspects related to contract notes and electronic transactions.