Liquidity Arrangements for Issuers Seeking to List by Introduction
In April, the Exchange provided guidance on liquidity arrangements for issuers seeking to list by introduction where the securities to be listed are already listed on another stock exchange (this does not apply to a PRC company seeking to list H-shares on the Exchange by way of introduction upon converting its B shares into H shares).
An issuer must propose a suitable designated period, typically one to three months commencing from the first day of the introduction, to facilitate liquidity for its securities in the Hong Kong market. An issuer’s liquidity measures are to ensure an adequate supply of securities in the Hong Kong market during the designated period.
The guidance covers the following areas:
- Disclosures in the prospectus;
- Contents, timing and method of publication of announcements in the issuer’s overseas market and Hong Kong;
- Investor education materials;
- Appointment and functions of designated dealer; and
- Batch and expedited removal services.
For a copy of Guidance Letter GL53-13, please follow this link:
http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/gl53-13.pdf
Simplification of Prospectus ‘Risk Factors’ Section
In May, the Exchange published guidance on disclosures in the “Risk Factors” section of prospectuses. Listing applicants are expected to follow this guidance letter, and a prospectus that does not follow this guidance may be considered not substantially complete.
The main principles on disclosure of risk factors are as follows:
(i) risks should be relevant to the listing applicant;
(ii) there should, if possible, be quantitative disclosure of the
likely impact of the risks (not just qualitative disclosure
or background information) to allow investors to assess
the size and impact of the risks;
(iii) risks should be identified individually, avoiding repetition
and overlaps;
(iv) risk factor disclosures should relate to risks that applicants
are unable to mitigate adequately, and if the occurrence of
a particular risk event would have a significant effect on the
applicant, the risk should be disclosed even if it has a low
probability of occurence;
(v) related risk factor disclosures should be grouped together
with appropriate and meaningful headings and subheadings;
(vi) risk factors should be ordered from most to least important;
(vii) mitigating facts should not be included in the description of a risk factor;
(viii) the “Risk Factors” section should be consistent with the information in other sections of the prospectus;
(ix) risk factors which are outdated and no longer applicable
should be removed; and
(x) disclaimer statements that lack specificity should not be used.
For a copy of Guidance Letter GL54-13, please follow this link:
http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/gl54-13.pdf
Simplification of Prospectus ‘Summary and Highlights’ Section
In June, the Exchange published an update of its guidance letter GL27-12 (originally issued in January 2012) regarding the “Summary and Highlights” section of prospectuses. The only new item of guidance stipulates use of a legible font size (neither too small nor too large). A range of 10pt–12pt is suggested, though the letter notes that different typesets in the same point size may not be equally legible.
For a copy of the updated Guidance Letter GL27-12, please follow this link:
http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/gl27-12.pdf
For further information, please contact: