Statement I is correct. According to the Listing Rules (specifically Rule 2A.11), a request for a review of a decision by the Listing Committee must be notified to the Exchange within seven days of that decision. Statement II is incorrect. The rules explicitly grant the adviser the right to be accompanied by its professional advisers (such as lawyers) during any disciplinary proceedings, including review hearings. This is a key aspect of procedural fairness. Statement III is correct. This reflects the principle of natural justice. The Listing Division is required to provide the adviser with copies of any papers it will present at the meeting in advance, ensuring the adviser has a fair opportunity to prepare its case. Statement IV is incorrect. The adviser’s first right is to have the decision reviewed again by the Listing Committee. Only after this review can the matter, for certain issues, be referred to the Listing Appeals Committee for a final review. The Listing Appeals Committee is not the first port of call. Therefore, statements I and III are correct.

Statement I is correct. A complete pivot from one distinct industry (e.g., software) to another (e.g., digital asset management) is considered a fundamental change in the principal business activities of the issuer. Statement II is correct. Under GEM Rule 17.25, an issuer is prohibited from implementing such a fundamental change during the financial year of its listing and the two subsequent financial years without obtaining prior approval from its independent shareholders. As the company is only 18 months post-listing, it falls squarely within this restricted period. Statement III is incorrect. According to GEM Rule 6A.23, the issuer must consult with its compliance adviser before the publication of any regulatory announcement or circular. The process of proposing a fundamental business change and calling for a shareholder vote would necessitate such publications, meaning the consultation must happen before, not after, the shareholder vote. Statement IV is incorrect because it misidentifies the key external approval required. While internal board approval is necessary, the critical regulatory hurdle stipulated by the GEM Listing Rules for this specific situation is the approval from independent shareholders, not a particular composition of the board of directors. Therefore, statements I and II are correct.

Statement I is correct. According to the Model Code for Securities Transactions by Directors of Listed Issuers (Appendix 10 of the Main Board Rules), a director must not deal in the securities of the listed issuer during the ‘black-out period’. This period commences one month immediately preceding the earlier of the board meeting date for results approval or the publication deadline, and ends on the date of the results announcement. Selling shares two weeks before the board meeting falls squarely within this prohibited period.

Statement II is correct. The information about securing a major new contract that is expected to significantly boost future revenue is likely to be considered Price-Sensitive Information (PSI). Under the Main Board Listing Rules (Rule 13.09), an issuer must disclose any information that is necessary to avoid the establishment of a false market or might materially affect the market activity and price of its securities. This disclosure must be made as soon as reasonably practicable.

Statement III is incorrect. The Corporate Governance Code (Appendix 14 of the Main Board Rules) distinguishes between Code Provisions and Recommended Best Practices. For Code Provisions, issuers must ‘comply or explain’. However, Recommended Best Practices are for guidance only. Issuers are encouraged, but not required, to state whether they have complied with them and to give reasons for any deviation. Compliance is not mandatory.

Statement IV is correct. The prohibition on dealing while in possession of unpublished PSI is a fundamental principle that applies at all times, regardless of whether it is a black-out period or not. Even if the director’s proposed transaction were outside the black-out period, his knowledge of the major, unannounced contract would constitute unpublished PSI, legally precluding him from dealing in the company’s shares. Therefore, statements I, II and IV are correct.

This question assesses the understanding of the dual filing regime in Hong Kong, which involves a division of responsibilities between Hong Kong Exchanges and Clearing Limited (HKEX) and the Securities and Futures Commission (SFC) for regulating listing applicants and listed issuers.

Statement I is correct. The HKEX acts as the frontline regulator for the stock market. It is responsible for the day-to-day administration and regulation of the listing process, including reviewing listing applications to ensure they comply with the detailed requirements set out in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘Listing Rules’).

Statement II is correct. Under the Securities and Futures (Stock Market Listing) Rules, the SFC has the power to review listing application materials filed with the HKEX. A key power is its ability to object to a listing if, for example, the prospectus is found to contain false or misleading information, or if it is not in the public interest for the company to be listed. This power is a cornerstone of the dual filing system, giving the SFC an oversight and intervention role.

Statement III is incorrect. The final approval for listing is granted by the Listing Committee of the HKEX, not the SFC. While the SFC can effectively block a listing by issuing an objection letter, it does not grant the positive approval itself. The process requires the SFC to have no objection before the HKEX can proceed with the final approval.

Statement IV is incorrect. The SFC’s regulatory role does not cease after a company is listed. Both the HKEX and the SFC have responsibilities for post-listing regulation. The HKEX monitors ongoing compliance with the Listing Rules (e.g., disclosure of price-sensitive information), while the SFC investigates and takes enforcement action against market misconduct, insider dealing, and breaches of the Securities and Futures Ordinance (SFO) by listed companies and their directors. Therefore, statements I and II are correct.

This question assesses the understanding of key eligibility requirements for a new applicant on the GEM market under the Hong Kong Stock Exchange Listing Rules.

Statement I is correct. According to GEM Rule 11.14, the Exchange may accept a shorter period of active business pursuits (less than 24 months) for newly-formed ‘project’ companies, which explicitly includes natural resource exploitation companies. Since Geo-Resource HK Ltd is a mining company, it may qualify for this exception.

Statement II is incorrect. GEM Rule 11.12 requires that a new applicant must have been under ‘substantially the same management’ over the period of its active business pursuits. Assembling a completely new management team from various competitors only 6 months prior to the assessment would likely fail this continuity requirement.

Statement III is correct. GEM Rule 11.12 also mandates that a new applicant must have a focused line of business and not engage in more than one disparate business. A tech consulting division is unrelated to the core business of mineral exploitation and would be considered a disparate business that needs to be addressed, typically through divestment, before listing.

Statement IV is incorrect. GEM Rule 11.15 requires a new applicant to state its business objectives for the period covering the remainder of the financial year in which listing occurs AND the two financial years thereafter. The statement incorrectly omits the period covering the remainder of the listing year. Therefore, statements I and III are correct.

The correct answer is that the transaction will be treated as a reverse takeover, and the listed issuer will be regarded as a new listing applicant. According to the Hong Kong Listing Rules, a reverse takeover (RTO) occurs not only when an acquisition results in a change of control and meets the very substantial acquisition (VSA) threshold, but also under specific circumstances to prevent ‘backdoor listings’. One such circumstance is when a party gains control of a listed issuer, and within 24 months of that change in control, the issuer acquires assets from that new controlling shareholder (or their associates), and the acquisition would constitute a VSA (i.e., any percentage ratio is 100% or more). In this scenario, the asset injection from the new controlling shareholder occurs within the 24-month window and exceeds the 100% threshold, thus triggering the RTO provisions. Consequently, the issuer must comply with the procedures and requirements for a new listing applicant. Simply classifying the transaction as a VSA is insufficient because the specific context of the asset injection by a new controlling shareholder elevates its regulatory treatment to that of an RTO. Classifying it as a major transaction is incorrect as the percentage ratios clearly exceed the threshold for a major transaction and meet the VSA/RTO threshold. While the transaction is also a connected transaction, the RTO classification is the overriding and more stringent one, requiring treatment as a new listing, which goes beyond standard connected transaction requirements.

According to Rule 26 of the Hong Kong Code on Takeovers and Mergers, a mandatory general offer (MGO) is triggered when a person, or a group of persons acting in concert, acquires 30% or more of the voting rights in a company. In this scenario, Apex Capital’s stake will increase from 29% to 32%, crossing the 30% threshold. The correct answer is that it must make a mandatory general offer to all other shareholders of Innovate Robotics Ltd. This rule is designed to ensure that all shareholders are treated equally and have the opportunity to exit their investment at a fair price when control of the company changes. One of the incorrect options suggests that Apex Capital must first obtain approval from the Takeovers Executive before completing the acquisition. While the Executive must be consulted and will review the offer documents, the primary obligation triggered by crossing the threshold is the requirement to make the offer itself, not to seek pre-approval for the share purchase. Another incorrect option states that a partial offer is required to reach a 51% holding. This confuses a mandatory general offer with a voluntary partial offer, which is a different type of transaction with its own set of rules and is not obligatory. The final incorrect option suggests that only a public announcement is required. While disclosure is a necessary part of the process, it is insufficient on its own; the core obligation under the Takeovers Code in this situation is to extend an offer to all other shareholders.

The correct answer is that all members present for the review must be individuals who were not present at the initial meeting where the decision was made. According to the Listing Rules, a fundamental principle of procedural fairness in disciplinary reviews is that the matter must be considered by a fresh set of committee members. This ensures impartiality and prevents the same individuals who made the original decision from simply reaffirming it without a genuine re-evaluation. The Chief Executive of HKEx is not required to be excluded from the meeting; they may attend to present views but cannot be counted in the quorum and must abstain from voting. There is no rule stipulating a higher quorum of seven members for a review; the standard quorum of five applies, with the key condition being the composition of those members. Similarly, while the committee includes market practitioners, there is no requirement that they must form a majority at a review meeting.

The correct answer is that the issuer must have a net asset value of at least HK$2 billion. According to Chapter 15A of the Hong Kong Listing Rules, an entity seeking to issue non-collateralized derivative warrants must meet specific suitability criteria. One of the key financial requirements is possessing a net asset value of not less than HK$2 billion. Additionally, the issuer must not be a private company and must either have a credit rating, be regulated by the Hong Kong Monetary Authority (HKMA) or the Securities and Futures Commission (SFC), or be a government or state entity. The requirement for a market capitalization of at least HK$4 billion applies to the underlying shares on which the derivative warrants are issued, not to the issuer itself. There is no specific rule mandating a five-year operational history for the issuer. While an issuer cannot be a private company, the rules do not strictly require it to be listed on the Main Board; being a regulated entity like a bank can also satisfy the suitability criteria.

The correct answer is that the transaction will be treated as a reverse takeover (RTO), and the listed company must comply with the procedures for a new listing applicant. Under the Hong Kong Listing Rules, a reverse takeover is an acquisition or a series of acquisitions that the Exchange deems to be an attempt to list the target assets while circumventing the usual new listing requirements. Key indicators of an RTO include an acquisition that is very substantial in size combined with a change in control of the listed issuer. In this scenario, the acquisition is extremely large (assets over 200%, far exceeding the 100% threshold for a Very Substantial Acquisition), and a change of control occurs as the target’s owners will hold 70% of the listed company. When a transaction is classified as an RTO, the Exchange treats the listed issuer as if it were a new listing applicant. This means the enlarged group (the listed company plus the acquired assets) must meet all the substantive requirements for a new listing, including financial track record, management continuity, and public float. Classifying the transaction merely as a very substantial acquisition (VSA) is incorrect because, while it meets the size criteria for a VSA, the accompanying change of control triggers the more stringent RTO rules. The RTO framework is specifically designed to prevent backdoor listings. Considering it a major transaction is incorrect as the percentage ratios are significantly above the 25% threshold for major transactions. Suggesting that the Exchange will only require a trading halt and a shareholder circular is insufficient; these are procedural steps, but the core regulatory treatment is that of a new listing application, which is a much more comprehensive process.

This question assesses the understanding of the specific requirements for an overseas issuer seeking a secondary listing on the Hong Kong Stock Exchange under Chapter 19 of the Listing Rules.

Statement I is correct. Under Rule 19.05(1)(b) of the Listing Rules, an overseas issuer must appoint and maintain a person authorized to accept service of process and notices on its behalf in Hong Kong.

Statement II is correct. The Listing Rules, particularly around Rule 19.32, grant the Stock Exchange discretion for secondary listings. The Exchange may make allowances and waive or modify certain requirements that would typically apply to a primary listing, depending on the issuer’s jurisdiction and primary market.

Statement III is correct. This reflects the principle in Rule 19.46. If the Exchange believes the majority of trading in the issuer’s securities is likely to shift to Hong Kong, it must be satisfied that the issuer’s primary listing is on a regulated stock market that it recognizes. This ensures a high standard of primary regulation is maintained even if Hong Kong becomes the main trading venue.

Statement IV is incorrect. There is no automatic requirement for an issuer to transfer its primary listing to Hong Kong if trading volume becomes dominant here. The key requirement under Rule 19.46 is that the existing primary listing is on a recognized exchange with which the SEHK has a cooperation agreement, ensuring adequate primary regulation. The Exchange might impose additional requirements, but an automatic transfer is not mandated by the rules. Therefore, statements I, II and III are correct.

The scenario describes an off-market share repurchase, which is a transaction conducted outside the trading facilities of the Stock Exchange of Hong Kong, typically with a specific shareholder. Such transactions are governed by the Code on Share Buy-backs (also known as the Share Repurchase Code). Statement I is correct because Rule 2 of the Share Repurchase Code explicitly requires that any off-market share repurchase must be approved by the Executive (the Executive Director of the Corporate Finance Division of the SFC or any delegate) before the transaction is made. Statement II is also correct as Rule 2 further stipulates that the Executive’s approval will normally be conditional upon the repurchase being approved by a majority of at least 75% of the votes cast by disinterested shareholders (i.e., independent shareholders) in a general meeting. Statement III is incorrect; the rule limiting the repurchase price to no more than 5% above the average closing price for the five preceding trading days applies to on-market share repurchases under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), not to off-market repurchases. Statement IV is incorrect because while certain employee share repurchases can be exempt, a large, negotiated repurchase from a retiring founder is not automatically classified as an exempt repurchase and falls squarely under the definition of an off-market repurchase requiring specific approvals. Therefore, statements I and II are correct.

The correct answer is that the new maximum price for a stabilizing bid is HK$19.90. According to the Securities and Futures (Price Stabilizing) Rules, a stabilizing manager must not place a bid above the public offer price. In this scenario, the initial stabilizing bid was HK$19.80, which is below the offer price of HK$20.00. However, the rules allow for a new, higher stabilizing price limit if an independent transaction occurs on the principal market at a price that is higher than the last stabilizing bid but still below the public offer price. The price of that independent transaction then becomes the new ceiling. Here, the independent trade at HK$19.90 sets the new maximum price for subsequent stabilizing actions. Therefore, the manager can now stabilize at or below HK$19.90. The public offer price of HK$20.00 remains the ultimate cap but is not the immediate operative limit after the independent trade. The initial stabilizing price of HK$19.80 is no longer the ceiling, as the rules permit the price to be raised to the level of the intervening independent trade.

Statement I is correct. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Main Board Listing Rules) mandate that the board of directors of a listed issuer must include at least three independent non-executive directors (INEDs). Statement II is also correct. The Listing Rules further require that at least one of these INEDs must possess appropriate professional qualifications or accounting or related financial management expertise. Statement III is incorrect. The Code on Corporate Governance Practices distinguishes between ‘Code Provisions’ and ‘Recommended Best Practices’. Issuers are expected to comply with the Code Provisions but may deviate if they provide a considered explanation (the ‘comply or explain’ approach). Recommended Best Practices are for guidance and are not mandatory. Statement IV is correct. To remove regulatory duplication, the SFC’s function of vetting prospectuses under the Companies (Winding Up and Miscellaneous Provisions) Ordinance was transferred to the HKEx. The Listing Division of the HKEx is now the primary body responsible for this review. Therefore, statements I, II and IV are correct.

The correct answer is that the waiver must be approved by independent shareholders at a general meeting. Under Rule 26 of the Hong Kong Code on Takeovers and Mergers, an obligation to make a mandatory general offer is triggered when a person, or a group of persons acting in concert, acquires 30% or more of the voting rights in a company. In this scenario, the new share subscription would take the investor’s stake over this threshold. However, the SFC Executive may grant a ‘whitewash’ waiver from this obligation. The core condition for granting such a waiver is that the transaction is approved by a vote of shareholders who are independent of the transaction at a general meeting. This ensures that the shareholders who are not involved in the control-gaining transaction explicitly agree to waive their right to receive a general offer. Approval solely from the company’s board of directors is insufficient because the Takeovers Code prioritises the rights of shareholders, particularly in matters of company control. An undertaking from the investor to hold their stake for a certain period does not address the fundamental issue of a change in control occurring without giving other shareholders an exit opportunity. While the subscription price is a critical commercial term for the board to consider, the Takeovers Code does not prescribe a specific premium as a condition for granting a whitewash waiver; its focus is on the procedural fairness of the shareholder vote.

This question tests the understanding of the ‘chain principle’ under Rule 26.1, Note 8 of the Hong Kong Code on Takeovers and Mergers. A chain principle obligation arises when the acquisition of a company (the first company) results in the acquirer gaining or consolidating control (30% or more of the voting rights) over a second company because the first company holds a controlling stake in the second.

Statement I is correct. The Executive applies a ‘significance test’ to determine if the chain principle applies. The obligation is more likely to arise if the holding in the second company (Crest Ventures) is a significant asset of the first company (Beacon Industries). Significance can be measured by comparing the assets or profits attributable to the respective companies.

Statement II is correct. The Executive will consider the acquirer’s motivation. If securing control of the second company was a significant purpose for acquiring the first company, a mandatory offer for the second company is highly likely to be required.

Statement III is correct. The chain principle is triggered when, as a result of the primary acquisition, the acquirer obtains or consolidates control over the second company. In Hong Kong, ‘control’ is defined as holding 30% or more of the voting rights. Since Beacon Industries holds 35% of Crest Ventures, acquiring control of Beacon would trigger this condition.

Statement IV is incorrect. The offer price for the shares in the second company (Crest Ventures) is not determined by the price paid for the first company (Beacon Industries). The Executive will determine the appropriate price, which should be based on the value attributable to the second company’s shares within the transaction for the first company. Therefore, statements I, II and III are correct.

According to the Hong Kong Code on Takeovers and Mergers, specifically Rule 15.4, an offeree company is generally prohibited from announcing any trading results, profit or dividend forecasts, asset valuations, or major transactions after the 39th day following the posting of the offer document. This rule is rooted in General Principle 2.5, which aims to give shareholders a stable period of at least three weeks to consider an offer without being influenced by last-minute, potentially material information. In the scenario, the proposed announcement is on Day 40, which is after this deadline. Therefore, the correct procedure is that the board of the offeree company must seek and obtain the consent of the Takeovers Executive before it can make such an announcement. The Executive will consider the circumstances before granting permission. The option suggesting an announcement is permissible until the 60th day is incorrect; this confuses the deadline for new information (Day 39) with the final day for the offer to become unconditional as to acceptances (Day 60). The idea that only the offeror’s approval is needed is also incorrect, as the Takeovers Executive is the regulatory body responsible for enforcing the Code, not the counterparty in the transaction. Finally, the statement that profit forecasts are allowed while asset valuations are not is a false distinction, as Rule 15.4 explicitly restricts both types of announcements after the 39th day without the Executive’s consent.

The correct answer is that the HKSI Licensing Examination serves as a Recognised Industry Qualification for demonstrating competence as required by the SFC. The Securities and Futures Ordinance (SFO) requires individuals seeking to be licensed to be ‘fit and proper’, which includes being competent. The SFC has approved the Licensing Examination as a primary means for applicants to prove they possess the necessary knowledge of the laws, regulations, and market practices relevant to the regulated activities they wish to conduct. Passing the examination is a crucial step in meeting the competence requirements for licensing. It does not, however, automatically grant a license, as the applicant must still meet all other ‘fit and proper’ criteria and complete the full application process. The examination is a requirement under the SFC’s regime, not a designation administered by the Hong Kong Monetary Authority, although individuals in banks conducting regulated activities may also need to pass it. Furthermore, while the ‘fit and proper’ test does assess financial soundness and good character, the examination’s specific purpose is to test knowledge and competence, not these other personal attributes.

Under the Securities and Futures Ordinance (SFO), the Market Misconduct Tribunal (MMT) can identify a person as having engaged in market misconduct if they are an ‘associate’ of an individual who possesses relevant, non-public information and they deal in the listed securities of the related corporation. The definition of an associate explicitly includes the person’s spouse. In this scenario, Mr. Lau, as a director of the advisory firm handling the takeover, is in possession of price-sensitive information. His spouse’s trading activity in the target company’s shares before the public announcement would be scrutinized. Because she is his spouse, she is considered his associate. The MMT would likely conclude that she has engaged in market misconduct by dealing while her associate (Mr. Lau) possessed inside information. It is not necessary for the spouse to be a ‘connected person’ (e.g., a director or employee) of the target company herself; her liability arises from her association with the insider. Furthermore, while direct evidence of procurement strengthens a case, the MMT can make a finding based on the circumstances, and the close relationship and timing of the trade are highly indicative. There are no general exemptions for the personal dealings of an adviser’s family members; the available defences are very specific and do not apply here.

The Takeovers and Mergers Panel is a body established to oversee and enforce the Codes on Takeovers and Mergers and Share Buy-backs. Its membership is drawn from various sectors of the financial and professional community to ensure broad representation and expertise. Statement I is correct as the Panel includes representatives from the Securities and Futures Commission (SFC). Statement II is correct as it also includes a representative from the Hong Kong Exchanges and Clearing Limited (HKEX). Statement IV is correct as professional bodies like the Hong Kong Institute of Certified Public Accountants are represented. However, statement III is incorrect; the Panel does not include directly appointed members from the Legislative Council, as it is an industry-based regulatory body, not a statutory or political one. Its members are appointed by the Financial Secretary under the authority of the Securities and Futures Ordinance. Therefore, statements I, II and IV are correct.

This question tests the personnel requirements for a firm to be approved as a sponsor under the Hong Kong Listing Rules (e.g., Main Board Rule 3A.07 and GEM Rule 6A.16). A sponsor must have at least two executive directors who meet specific criteria. Statement II is correct because Ms. Lee fulfills all key requirements: she is a licensed representative (Type 6 – Advising on Corporate Finance), works full-time in Hong Kong corporate finance, and has substantially exceeded the minimum experience of acting in a substantive capacity on at least two completed IPOs on the Main Board or GEM within the last five years. Statement I is incorrect because Mr. Chan has only completed one IPO in the last five years, failing to meet the minimum requirement of two. Statement III is correct. The rules require at least two ‘other members of staff’ who must be engaged full-time in the corporate finance business in Hong Kong and be licensed representatives. There is no specific IPO transaction experience requirement for this category of staff, unlike for the executive directors. Statement IV is incorrect because the requirements are specific to Hong Kong. The director must be engaged full-time in the corporate finance business in Hong Kong and be a licensed representative under the Securities and Futures Ordinance (SFO). Experience and licenses from other jurisdictions, such as mainland China, do not satisfy these specific requirements. Therefore, statements II and III are correct.

A company seeking to transfer its listing from the GEM to the Main Board of the Hong Kong Stock Exchange must undergo a process that is treated as a new listing application. This means it must meet all the relevant eligibility criteria for the Main Board as if it were applying for the first time. Statement I is therefore correct. If the company already has a sufficient number of its shares held by the public to meet the Main Board’s public float requirements, it may be able to list by way of ‘introduction’. This method does not involve the issuance of new shares or the raising of new capital, as a sufficient market for the shares is presumed to exist. Statement II is therefore also correct. Statement III is incorrect; while the company’s trading history on GEM will be used to demonstrate its track record, it is not granted an automatic exemption from the Main Board’s three-year trading record requirement. The application is assessed against the full Main Board criteria. Statement IV is incorrect because a Main Board applicant has the flexibility to satisfy any one of the three financial eligibility tests: the profit test, the market capitalisation/revenue/cash flow test, or the market capitalisation/revenue test. It is not restricted to using only the profit test. Therefore, statements I and II are correct.

The correct answer is that the board must obtain approval from its shareholders at a general meeting. Under Rule 4 of the Hong Kong Code on Takeovers and Mergers, the board of an offeree company is prohibited from taking any action which could effectively result in any bona fide offer being frustrated, without the approval of shareholders in a general meeting. The issuance of a significant number of new shares, which would alter the company’s share capital and potentially dilute the offeror’s prospective holding, is considered a classic example of a ‘frustrating action’. Therefore, even if the company has a pre-existing general mandate under the Listing Rules (e.g., to issue up to 20% of its share capital), this mandate cannot be freely exercised during an offer period. The specific requirements of the Takeovers Code override the general permissions granted by the Listing Rules in this context to ensure that shareholders, not the board, decide on matters that could affect the outcome of a takeover offer. Relying solely on the existing general mandate is incorrect because the Takeovers Code imposes this specific shareholder approval requirement during an offer period. Seeking only the consent of the Takeovers Executive is insufficient; the primary approval must come from shareholders, although the Executive oversees the entire process. Obtaining the offeror’s consent is also not the correct procedure, as the offeree board’s duty is to its own shareholders, who must provide the ultimate authority for such a corporate action.

This question assesses understanding of the key rules governing on-market share repurchases by a Hong Kong-listed company.

Statement I is incorrect. Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), which work in conjunction with the Share Repurchase Code, the price at which a company may make an on-market share repurchase must not be higher by 5% or more than the average closing market price for the five preceding trading days on which the shares were traded.

Statement II is correct. There is a moratorium or ‘blackout’ period. A listed issuer is prohibited from repurchasing its shares on the Exchange during the one month immediately preceding the earlier of the date of the board meeting for the approval of the issuer’s results for any year or half-year, and the deadline for the issuer to publish its results announcement.

Statement III is correct. This is a critical interaction between the Share Repurchase Code and the Takeovers Code. A share repurchase reduces the number of shares in issue, which can passively increase the percentage holding of the remaining shareholders. If a shareholder’s (or a group of shareholders acting in concert) voting rights increase to 30% or more as a result, it triggers a mandatory general offer obligation under Rule 26 of the Takeovers Code, unless a ‘whitewash’ waiver has been obtained from shareholders.

Statement IV is incorrect. The SFC Executive’s prior consent is a requirement for off-market share repurchases, not for on-market repurchases conducted under a shareholder-approved general mandate and in accordance with the Listing Rules. Therefore, statements II and III are correct.

Under Parts XIII and XIV of the Securities and Futures Ordinance (SFO), insider dealing is a form of market misconduct. It occurs when a person connected with a listed corporation has information they know is ‘relevant information’ (i.e., specific, non-public information that would likely materially affect the price of the securities) and deals, counsels, or discloses that information.

In this scenario, the analyst is a ‘connected person’ as he has access to the information through his professional capacity advising the target company. The details of the takeover, including the offer price, are classic examples of relevant (price-sensitive) information.

I. Dealing in the shares of the target company (‘TechInnovate Ltd’) while in possession of this non-public information is a direct act of insider dealing.

II. Counseling or procuring his friend to deal in the shares, even without disclosing the specific details, is also an offence. The act of encouraging another person to trade based on the existence of inside information is prohibited.

III. The information about the acquisition is also price-sensitive for the acquiring company (‘Global Solutions Inc.’). Dealing in the acquirer’s shares based on this non-public information also constitutes insider dealing.

IV. Disclosing the specific, non-public information to a third party (the journalist), knowing or having reasonable cause to believe that the person will use the information for the purpose of dealing, is a prohibited act of disclosure.

All four actions described fall within the scope of insider dealing offences under the SFO. Therefore, all of the above statements are correct.

This question assesses understanding of the prospectus liability framework and the dual filing regime in Hong Kong. Statement I is correct; under sections 40 and 40A of the Companies Ordinance, directors are primarily responsible for the contents of a prospectus. The verification process, where directors approve verification notes, is a critical part of the due diligence defence to demonstrate they had reasonable grounds to believe the statements were true. Statement II is incorrect; under the dual filing system, the Stock Exchange of Hong Kong (the Exchange) is the front-line reviewer and the primary point of contact for listing applicants. The SFC performs a complementary gatekeeping role but does not act as the primary, front-line reviewer. Statement III is correct; the Securities and Futures (Stock Market Listing) Rules empower the SFC to review draft listing documents and object to a listing if it finds the disclosure to be materially insufficient or inadequate. This is a key feature of the dual filing regime. Statement IV is incorrect; liability for prospectus misstatements extends beyond directors and sponsors. Section 40(1)(c) of the Companies Ordinance explicitly includes promoters of the company among those who can be held liable. Therefore, statements I and III are correct.

According to the Hong Kong Code on Takeovers and Mergers, the Executive will normally waive the mandatory general offer obligation for a lender who acquires control of a company as a result of enforcing a security interest for a loan. This waiver is conditional on two key factors: the security must have been provided on an arm’s-length commercial basis, and at the time the security was given, the lender had no reason to believe that enforcement was likely. The scenario describes a loan made on standard terms when the company was financially healthy, fitting these conditions for a waiver. Therefore, the bank would not be required to make an immediate mandatory offer. The requirement to dispose of excess shares within a limited period applies to situations where an offer obligation is triggered by an inadvertent mistake, which is not the case here. Seeking a whitewash waiver is a procedure related to the issuance of new securities that would trigger an offer obligation, not the enforcement of security over existing shares. While the bank is likely to receive a waiver for the acquisition, it is important to note that if the bank later sells this block of shares to a single purchaser, that purchaser would then be subject to the mandatory offer rules under Rule 26.

The correct answer is that the firm must be able to demonstrate to the Stock Exchange that the issues leading to the censure have been fully rectified and that it has implemented robust internal controls to prevent recurrence, ensuring its judgment on the new mandate is not impaired. According to the Corporate Finance Adviser Code of Conduct and the Listing Rules, a sponsor’s independence and suitability are paramount. A past disciplinary action, such as a public censure, does not automatically disqualify a firm from taking on new mandates. However, it raises significant questions about the firm’s competence, diligence, and the effectiveness of its internal controls. The sponsor has the burden to prove to the regulators, primarily the Stock Exchange of Hong Kong, that it has undertaken a thorough review of the past failings, implemented comprehensive remedial measures, and that these measures are effective in preventing a recurrence. This is a critical part of demonstrating that it can discharge its duties professionally and objectively for the new listing applicant. The other options are incorrect. There is no specific rule that imposes an automatic 24-month ban on a sponsor following a public censure; regulatory assessment is based on the specific facts and the firm’s remedial actions. The past censure is highly relevant even if it involved a different client, as it may indicate systemic weaknesses in the sponsor’s firm-wide policies and procedures. Finally, merely disclosing the censure to the new client is insufficient; the primary obligation is to satisfy the Stock Exchange of its suitability and ability to meet its regulatory responsibilities, which is a far more rigorous requirement than simple client disclosure.

The correct answer is that the company must have a minimum of 300 public shareholders. According to the GEM Listing Rules, the required minimum number of public shareholders at the time of listing depends on the length of the applicant’s active business track record. For an applicant with an active business history of at least 24 months, the minimum is 100 public shareholders (GEM Rule 11.23(2)(b)). However, for an applicant like this one, which has a shorter track record of more than 12 months but less than 24 months, a higher threshold of 300 public shareholders is required (GEM Rule 11.12(3)(c)). The requirement of 100 public shareholders is incorrect because it applies to companies with a longer, 24-month business history. The figure of 500 shareholders is typically associated with the Main Board listing requirements, not GEM. The assertion that no minimum number is needed as long as the public float percentage is met is also incorrect, as the number of shareholders is a distinct and mandatory requirement separate from the public float percentage.

According to GEM Listing Rule 5.19, a GEM issuer must appoint a compliance officer. GEM Listing Rule 5.20 outlines the minimum responsibilities for this role. Statement I is correct as it directly reflects the duty to advise and assist the board in implementing procedures for compliance with the GEM Listing Rules and other applicable laws. Statement II is also correct as it captures the requirement for the compliance officer to respond promptly and efficiently to all enquiries from the Exchange. Statement III is incorrect; while the compliance officer supports the overall compliance framework, the board of directors holds the ultimate responsibility for the accuracy and approval of financial statements. Statement IV is also incorrect; the compliance officer is not solely responsible for vetting the company’s prospectus. The prospectus is a collective effort involving the directors, sponsors, and legal advisors, with the directors taking ultimate responsibility for its contents. Therefore, statements I and II are correct.