The correct answer is ‘I, II & III only’.

Statement I is correct because, according to the Corporate Governance Code as outlined in Appendix 14 of the Main Board Listing Rules, a nomination committee with a majority of independent non-executive directors should be established to ensure independent oversight of the nomination process. This promotes good corporate governance by reducing the potential for conflicts of interest.

Statement II is correct as the Corporate Governance Code emphasizes the importance of continuous professional development for all directors. This ensures that directors remain informed about the latest developments in the business environment, regulatory landscape, and corporate governance practices, enabling them to effectively fulfill their duties.

Statement III is correct because disclosing details of remuneration payable to members of senior management on a named basis enhances transparency and accountability. This practice, recommended by the Corporate Governance Code, allows shareholders and other stakeholders to assess whether the remuneration packages are aligned with the company’s performance and strategic objectives.

Statement IV is incorrect. While listed issuers are required to appoint authorized representatives to act as the principal channel of communication with the Exchange, the requirement to employ a full-time qualified accountant does not apply to an issuer of debt securities, the equity securities of which are not listed on the Exchange. This is explicitly stated in rule 3.24 and GEM rule 5.15.

Statements I and II are correct. According to Rule 19A.07, if the authorized representatives of a PRC issuer are expected to be frequently outside Hong Kong, the Compliance Adviser must act as the PRC issuer’s principal channel of communication with the Exchange in Hong Kong. The Compliance Adviser must also provide the Exchange with the contact details of at least one of its officers and an alternate. Rule 19A.10 states that the reporting accountant for a PRC issuer must be qualified and independent, and the accounts must conform to a standard comparable to Hong Kong accounting standards, although PRC issuers may conform to IFRS. Statement III is incorrect because Rule 19A.13 requires a PRC issuer to appoint a person authorized to accept service of process in Hong Kong, not necessarily a Hong Kong resident. Statement IV is incorrect because while the secretary of a PRC issuer need not be ordinarily resident in Hong Kong, they must still meet the qualification/experience requirements of rule 8.17.

Statement I is correct because the Listing Rules apply to overseas issuers, with Chapter 19 outlining additional requirements, modifications, or exceptions. Statement II is correct because, for primary listings, overseas issuers must be incorporated in a jurisdiction with shareholder protection standards at least equivalent to those in Hong Kong. This ensures that investors receive a similar level of protection regardless of the issuer’s domicile. Statement III is incorrect because the Hong Kong share register only needs to record holders in Hong Kong when multiple share registers are maintained. This simplifies administrative processes by focusing the Hong Kong register on local shareholders. Statement IV is incorrect because if the Exchange believes the majority of trading will occur on the Exchange, the issuer’s primary listing must be on a regulated stock market recognized by the Exchange, with an adequate nexus and a written agreement between the primary regulator and the Exchange, as per rule 19.46. Therefore, the correct combination is I & II only.

The Exchange generally restricts further share issuances or convertible security issuances within six months of a company’s initial listing to prevent dilution and maintain market stability. Main Board Rule 10.08 and GEM Rule 17.29 outline specific exceptions to this rule, which are typically granted in circumstances such as urgent financial need or strategic acquisitions that demonstrably benefit the company and its shareholders.

Statement I is correct because it accurately reflects the general restriction imposed by the Exchange within the initial six months post-listing. Statement II is also correct as Main Board Rule 10.08 and GEM Rule 17.29 explicitly address exceptions to this restriction. Statement III is incorrect because while shareholder approval is often required for significant corporate actions, it doesn’t automatically override the Exchange’s restrictions on share issuance within the initial six-month period. Statement IV is incorrect because the Exchange’s primary concern is the potential for market manipulation and dilution, not solely the company’s stated intentions. Therefore, the correct combination is I & II only.

The correct answer is ‘I & II only’.

Statement I is correct because, according to Main Board Listing Rule 3A.19, a newly listed issuer must appoint a Compliance Adviser from the date of initial listing until it complies with the listing rule regarding its financial results for the first full financial year after listing. This ensures the issuer receives guidance during its initial period as a listed company.

Statement II is also correct. Main Board Listing Rule 3A.25 (and GEM Rule 6A.25) explicitly states that a Compliance Adviser must perform their duties with impartiality. This is crucial for maintaining objectivity and ensuring the advice given is in the best interest of the issuer and its shareholders, rather than being influenced by any conflicts of interest.

Statement III is incorrect. While directors have a general duty to ensure compliance with listing rules (Main Board Rule 3.08), the specific undertaking to cooperate with investigations conducted by the Listing Division and/or the Listing Committee, including answering questions and producing documents, is primarily the responsibility of the Compliance Adviser (Main Board Rule 3A.22) and the Independent Financial Advisor (IFA), not all directors. Directors’ undertaking is more general, focusing on ensuring the company’s overall compliance.

Statement IV is incorrect. While IFAs are required to be appropriately licensed by the SFC, this is not a requirement for Compliance Advisers. The Exchange must find the Compliance Adviser acceptable (Main Board Rule 3A.19), but there is no specific requirement that they be licensed by the SFC. The focus is on their experience and expertise in advising listed companies.

Under the Hong Kong Code on Takeovers and Mergers, a ‘frustrating action’ refers to actions taken by the offeree company (the company being targeted for takeover) that could thwart a potential offer or deny shareholders the opportunity to decide on the merits of the offer. These actions are generally restricted during an offer period or when an offer is considered imminent.

Issuing new shares (Statement I) can dilute the holdings of existing shareholders and make the takeover more expensive or difficult for the offeror. Creating convertible shares (Statement II) has a similar dilutive effect and can alter the capital structure of the company, potentially discouraging the offeror. Entering into new contracts not in the ordinary course of business (Statement III) can significantly alter the company’s financial position or strategic direction, which could frustrate the offeror’s intentions. However, the declaration of a dividend in the normal course (Statement IV) is typically not considered a frustrating action, as it is a routine distribution of profits to shareholders and does not fundamentally alter the company’s structure or prospects. Therefore, statements I, II, and III are actions that constitute frustrating action under the Hong Kong Takeovers and Mergers Code.

The Code of Conduct for Corporate Finance Advisers, issued by the SFC, serves as a crucial benchmark for assessing an adviser’s fitness and properness. This assessment considers various aspects of the adviser’s operations and adherence to regulatory standards. Statement I is correct because the Code explicitly states that advisers must ensure their business is properly established and conducted, and that they, their directors, and representatives are fit and proper and appropriately registered. This encompasses not only the initial setup but also the ongoing conduct of the business. Statement II is also correct as the Code mandates that advisers organize and control their business in a prudent and responsible manner, maintain satisfactory financial and operational controls, and maintain satisfactory risk management procedures. These requirements are fundamental to ensuring the stability and integrity of the adviser’s operations. Statement III is incorrect because while the Code emphasizes the importance of compliance with regulations like the Listing Rules and Takeovers Code, it does not explicitly state that an adviser’s fitness and properness will be solely determined by their compliance with these regulations. The SFC considers a broader range of factors. Statement IV is incorrect because the Code applies to all persons advising on corporate finance matters as defined in paragraph 1.2, not just those advising listed corporations. Therefore, the correct combination is I & II only.

Voluntary codes offer flexibility and adaptability, allowing regulators to respond quickly to evolving market conditions and specific transaction details. This is particularly valuable in complex financial environments where prescriptive legislation may struggle to keep pace. The SFC’s decision to maintain the Codes reflects a belief that this flexibility enhances efficiency and responsiveness in handling transactions. Additionally, the threat of sanctions under voluntary codes, as perceived by those involved in disciplinary proceedings before the Panel, demonstrates the effectiveness of these codes in ensuring compliance.

Prescriptive legislation, while providing a clear and legally binding framework, can be rigid and may not adequately address the nuances of every situation. The US system, which is statutory-based, offers legal certainty but may lack the adaptability seen in Hong Kong’s code-based system. The ‘cross-default’ provisions under the Listing Rules, where a breach of the Takeover Code is deemed a breach of the Listing Rules, highlight the interconnectedness of voluntary codes and statutory rules in Hong Kong. This integration allows the Exchange to penalize breaches of the Takeover Code, reinforcing the importance of adhering to the Codes. The roles and responsibilities outlined in the Codes extend to various parties, including directors, persons seeking control, professional advisors, and those actively engaged in the securities market, ensuring broad accountability.

According to the Share Repurchase Code in Hong Kong, a company is generally permitted to repurchase its own shares through specific channels. The primary methods authorized are on-market repurchases, conducted through the stock exchange, and off-market repurchases, which require specific shareholder approval. An on-market repurchase allows a company to buy back its shares directly from the market, providing liquidity and potentially increasing shareholder value by reducing the number of outstanding shares. This method is subject to certain limitations to prevent market manipulation and ensure fair trading practices. Off-market repurchases, on the other hand, involve direct negotiations with shareholders and require approval from independent shareholders to ensure that the repurchase is in the best interest of the company and its minority shareholders. This approach is often used for large-scale repurchases or when specific shareholders wish to sell their shares back to the company. The Share Repurchase Code aims to balance the company’s need for flexibility in managing its capital structure with the protection of shareholder interests and the integrity of the market. The Code ensures transparency and fairness in share repurchase activities, preventing insider trading and other abuses. The Securities and Futures Commission (SFC) oversees the enforcement of the Share Repurchase Code, ensuring compliance and taking action against any violations. Understanding these regulations is crucial for corporate finance advisors to ensure that share repurchases are conducted in accordance with the law and ethical standards.

The Listing Rules in Hong Kong require a new applicant to demonstrate an acceptable track record, typically three financial years, of active business operations. When a significant portion of the applicant’s business is conducted through subsidiaries, the Exchange scrutinizes the management, ownership, and control of these subsidiaries during the track record period. This is to ensure that the applicant genuinely controls and benefits from the subsidiary’s operations. The Exchange will assess whether the applicant has the power to direct the subsidiary’s policies and operations, appoint and remove key management personnel, and access the subsidiary’s profits. Any changes in ownership or control during the track record period must be disclosed and justified to the Exchange, demonstrating that these changes did not disrupt the continuity or quality of the business. Furthermore, the Exchange will investigate potential conflicts of interest if the subsidiary engages in businesses that compete with the applicant or its controlling shareholders. The applicant must demonstrate that adequate measures are in place to manage these conflicts and protect the interests of minority shareholders. The overall objective is to ensure that the applicant’s business is sustainable, well-managed, and free from undue influence or conflicts of interest, providing investors with a clear and accurate picture of the applicant’s financial performance and prospects. This scrutiny extends to the operational independence of the subsidiary, ensuring it operates at arm’s length from related parties.

The Securities and Futures (Price Stabilization) Rules permit and regulate price stabilization action connected with public offerings. The purpose is to facilitate public offers by allowing issuers or underwriters to conduct stabilizing action to prevent or retard the decline of the price of newly offered securities, relying on the PS Rules as a defense against market misconduct under Parts XIII and XIV of the SFO. The PS Rules do not allow downward stabilization.

Statement I is correct because the offer must be public in character to rely on the PS Rules as a safe harbor.

Statement II is correct because the offer must be the subject of a prospectus issued in connection with the offer or one which qualifies for the professional investor exemption.

Statement III is incorrect because the size of the offer in Hong Kong must not be less than HK$100 million, not HK$50 million.

Statement IV is incorrect because the offer of securities must be made for cash, excluding securities exchange offers normally encountered in takeover transactions. Therefore, securities exchange offers are not eligible.

Therefore, the correct combination is I & II only.

According to regulatory guidelines and best practices for financial advisors in Hong Kong, maintaining adequate resources is crucial for fulfilling their duties effectively and ethically. This encompasses several key areas, including competence, professional expertise, and sufficient human and technical resources. An advisor’s competence is reflected in their honesty, integrity, and adherence to high standards of fair dealing, as stipulated in paragraph 3 of relevant regulatory documents. Regulators may request evidence of qualifications and experience to ensure competence in handling corporate finance work. Avoiding conflicts of interest is also paramount; advisors should decline or withdraw from mandates where material conflicts arise. Maintaining proper books and records, employing suitable and qualified staff, and establishing an effective compliance function are essential components of resource adequacy. Continuous professional training for staff is also necessary to ensure ongoing competence and adherence to evolving regulatory standards. Small firms with limited resources may have senior management assume the compliance officer role. Acting with due skill, care, and diligence, and observing proper market conduct standards, are fundamental aspects of maintaining a high standard of work. Documenting engagement terms in writing helps ensure clarity and alignment between the advisor and client. Therefore, the most appropriate response emphasizes the comprehensive nature of resource adequacy, encompassing competence, expertise, and the necessary resources to perform duties effectively and ethically.

The HKSI Licensing Examination is designed to align with the single licensing regime established under the Securities and Futures Ordinance (SFO). This ordinance provides the legal framework for the regulation of the securities and futures markets in Hong Kong. The examination’s structure and content are specifically tailored to assess candidates’ understanding of the SFO and its implications for various regulated activities. The Academic and Accreditation Advisory Committee (AAAC) of the Securities and Futures Commission (SFC) plays a crucial role in ensuring the examination meets the required standards. The AAAC approves the HKSI Licensing Examination as a Recognised Industry Qualification and Local Regulatory Framework Paper, signifying that it adequately covers the competence requirements set forth by the SFC. This approval is essential for individuals seeking to become licensed intermediaries in Hong Kong’s securities and futures industry. The examination serves as a benchmark for assessing candidates’ knowledge and understanding of the regulatory environment, ethical conduct, and technical expertise necessary to perform their duties competently and in compliance with the law. The single licensing regime aims to streamline the licensing process and enhance regulatory oversight of intermediaries, promoting investor protection and market integrity. The HKSI Licensing Examination, therefore, is a critical component of this regime, ensuring that licensed individuals possess the necessary qualifications to operate within the regulated framework.

Convertible bonds, as debt securities, necessitate prior approval from the Exchange before issuance, emphasizing the regulatory oversight in corporate finance activities in Hong Kong. This requirement ensures that the Exchange can assess and control the potential impact of such securities on the market and investors. The dual compliance requirement for convertible debt securities convertible into new equity securities underscores the Exchange’s commitment to maintaining standards for both debt and equity instruments. This means that these securities must adhere to the listing requirements applicable to debt securities and the underlying equity securities, ensuring comprehensive regulatory coverage. The Exchange’s discretion to list convertible debt securities even when the underlying equity securities are not listed on a recognized market highlights its flexibility in accommodating different circumstances, provided that investors have sufficient information to evaluate the underlying assets. This flexibility is balanced by the need to protect investors and maintain market integrity. The exemption for issues by states or supranationals recognizes the unique nature of these entities and their role in the financial system. The additional disclosure requirements outlined in paragraphs 19 to 31 of Part C of Appendix 1 further emphasize the importance of transparency in the issuance of convertible debt securities. These requirements ensure that investors have access to all relevant information necessary to make informed investment decisions, aligning with the Exchange’s broader goal of promoting investor protection and market efficiency. The Exchange should be consulted at the earliest opportunity as to the requirements that will apply.

According to the Listing Rules governing share option schemes in Hong Kong, several key provisions must be included to ensure transparency and fairness. The maximum life of a share option scheme is explicitly limited to ten years from its inception. This provision ensures that the scheme remains relevant and aligned with the company’s strategic objectives over a reasonable timeframe. The total number of securities issuable under the scheme, combined with any other schemes, must not exceed 10% of the issuer’s relevant class of securities at the time of the scheme’s approval. This limit prevents excessive dilution of existing shareholders’ equity. Options that lapse according to the scheme’s terms are not counted towards this 10% limit, allowing for some flexibility in managing the scheme. While the Listing Rules mandate these specific provisions, they also allow for shareholder approval to exceed the 10% limit under certain conditions. Specifically, if the options exceeding the limit are granted to participants identified by the listed issuer before seeking approval, shareholders can vote to approve the additional grants. This requires the listed issuer to provide a circular to shareholders with a generic description of the identified participants, ensuring that shareholders are informed about who will receive the excess options. The rules also require that the period within which the securities must be taken up under the option, which must not be more than ten years from the date of grant of the option.

The question concerns the conditions under which the Executive (of the SFC) would normally grant consent for a partial offer under the Takeovers Code. Statement I is correct because the Executive typically consents if the offeror will end up with less than 30% of the voting rights. Statement II is also correct, as consent is usually granted if the offeror already holds more than 50% and the offer will take them to no more than 75%. Statement III is incorrect; if a partial offer may result in the offeror obtaining or consolidating control, the Executive’s consent will not normally be granted if the offeror or persons acting in concert with it have acquired voting rights in the offeree company during the 6 months prior to the commencement of an offer period. Statement IV is incorrect. A voluntary offer at a discount of more than 50% to the market price of the shares will not normally be allowed to proceed. The Executive should be consulted in all cases which fall within “low-ball” offers. Therefore, the correct combination is I & II only.

The Securities and Futures Commission (SFC) plays a pivotal role in maintaining the integrity and stability of Hong Kong’s securities market. Its functions, as outlined in the Securities and Futures Ordinance (SFO), are multifaceted and designed to protect investors, minimize systemic risks, and ensure the fairness, efficiency, and transparency of the market. The SFC’s regulatory oversight extends to market intermediaries, exchanges, and clearing houses. It also has statutory enforcement powers to address misconduct and crime within the securities industry. The Corporate Finance Division of the SFC is specifically tasked with regulating corporate finance activities, as detailed in various parts of the SFO. While the Hong Kong Government coordinates and encourages the development of Hong Kong as a financial center, the SFC acts as the primary regulator and enforcer. HKEx, on the other hand, operates the exchanges and clearing houses and is responsible for maintaining market integrity and the quality of listed companies. The SFC’s functions are critical for maintaining investor confidence and promoting the long-term health of Hong Kong’s financial markets. The SFC also assists the Financial Secretary in maintaining financial stability by taking appropriate steps in relation to the securities industry. The SFC’s regulatory committees, tribunals, and panels further support its oversight and enforcement activities.

The principle of treating all shareholders even-handedly is a cornerstone of Hong Kong’s securities regulations, particularly in the context of takeovers and mergers. This principle, as outlined in the Codes on Takeovers and Mergers, ensures fairness and equal opportunity for all shareholders, preventing any selective advantage or disadvantage. Statement I is correct because it accurately reflects the requirement for a general offer to all shareholders when control of a company changes, ensuring that all shareholders have the opportunity to exit their investment under the same terms. This is in line with the principle of even-handedness. Statement II is also correct, as it highlights the prohibition of providing information selectively to some shareholders during an offer or when an offer is contemplated. This prevents insider dealing and ensures that all shareholders have access to the same information to make informed decisions. Statement III is correct because it emphasizes the need for offerors to have the financial capacity to implement the offer fully, protecting shareholders from offers that cannot be completed. Statement IV is correct because it underscores the importance of providing shareholders with sufficient information, advice, and time to make an informed decision, aligning with the principle of transparency and fairness. Therefore, all the statements are correct and reflect the principles of even-handed treatment of shareholders under Hong Kong’s securities regulations.

According to the HKEx guidelines, a company is considered ‘very substantial’ if it meets specific criteria related to market capitalization and profitability. Specifically, the company must have a public shareholding with a market capitalization exceeding HK$500 million at the time of the proposed rights issue and must have reported profits in each of the last two financial years. If a company meets these criteria, the Exchange may allow it to proceed with a rights issue on a non-underwritten basis, subject to prior notification. However, the Exchange retains the discretion to insist on full underwriting, even for very substantial companies, particularly if the funds are intended for general corporate purposes. This ensures investor protection and market stability. The disclosure requirements for underwritten and non-underwritten rights issues are also crucial. For underwritten issues where the underwriter can terminate due to force majeure, this must be prominently disclosed. For non-underwritten issues, disclosure of the minimum amount to be raised and substantial shareholder undertakings are required. These measures aim to provide transparency and protect shareholders’ interests, aligning with the objectives of the Securities and Futures Ordinance and the Listing Rules.

The correct combination is ‘All of the above’. All the statements are correct regarding the appeal process for corporate finance advisors facing disciplinary actions by the Listing Committee of the Hong Kong Stock Exchange. Statement I is correct because the Listing Committee is obligated to provide written reasons for its decisions if requested by the corporate finance advisor. This allows the advisor to understand the basis of the decision and prepare for any subsequent review. Statement II is correct as the advisor has the right to request a review of the Listing Committee’s decision. This review can be conducted by the Listing Committee itself and, subsequently, by the Listing Appeals Committee for a final review. Statement III is correct because the advisor must notify the Exchange of their request for a review within seven days of the decision or within seven days of receiving the written reasons if they have requested them. This ensures timely progression of the appeal process. Statement IV is correct because the advisor has the right to attend meetings related to disciplinary proceedings, make submissions, and be accompanied by professional advisors. This is crucial for ensuring a fair hearing and allowing the advisor to present their case effectively. This aligns with the principles of natural justice, ensuring that the advisor is treated fairly and equally throughout the disciplinary process, as emphasized by the HKEx.

The question addresses the responsibilities of directors and financial advisors in the context of takeover offers under Hong Kong’s regulatory framework, specifically referencing Rule 9.4 of the Takeovers Code. Statement I is correct because Rule 9.4 mandates that all directors of the offeror or offeree take responsibility for the accuracy of the offer document unless an exclusion is granted by the Executive. Statement II is also correct. The Executive’s consent for excluding a director from the responsibility statement is only granted in exceptional circumstances, such as temporary unavailability (e.g., being overseas). Statement III is incorrect because while directors can delegate day-to-day responsibilities to a committee, they must still have a reasonable belief in the competence of those to whom they delegate. The remaining directors must also disclose relevant information to the committee. Statement IV is correct. Financial advisors are responsible for guiding their clients, including public relations advisors, regarding information released during a takeover offer, ensuring compliance with the Takeovers Code. Therefore, the correct combination is I, II & IV only.

The listing of a GEM (Growth Enterprise Market) company on the Main Board of the Hong Kong Stock Exchange is treated as a new listing application. However, it can often proceed by way of ‘introduction’ if sufficient shares are already held by the public, meeting the distribution requirements of the Main Board Listing Rules. This contrasts with a standard IPO, which involves raising new capital. The key consideration is whether the company already meets the public float requirements of the Main Board.

Options, warrants, and employee share option schemes represent alternative routes to listing. These methods involve the issuance of new shares resulting from the exercise of rights attached to these instruments. This contrasts with a direct IPO, where new shares are offered to the public to raise capital. The Exchange also retains the discretion to approve other methods of listing on a case-by-case basis, allowing for flexibility in accommodating novel listing structures.

Listing criteria for equities on the Main Board include incorporation status, suitability of the issuer and its business, satisfaction of financial tests (profit, market capitalization/revenue/cash flow, or market capitalization/revenue), and a trading record of at least three financial years under substantially the same management and ownership. These criteria ensure that only companies with a proven track record and suitable business models are admitted to the Main Board.

Statement I is correct because the GEM Rules explicitly require a designated compliance officer from an executive director to ensure adherence to rules and regulations, facilitating communication with the Exchange. This is outlined in GEM Rules 5.19 to 5.23. Statement II is also correct as the Code on Corporate Governance Practices provides guidelines on good corporate governance, with issuers expected to comply with Code Provisions or provide reasons for deviation in their reports. This promotes transparency and accountability. Statement III is correct because directors are expected to act honestly and in good faith with a view to the best interests of the company as a whole, as per common law and fiduciary duties. Statement IV is also correct as the Securities and Futures Ordinance (SFO) governs insider dealing, and directors are subject to these regulations. Therefore, all statements are accurate and relevant to the responsibilities and regulations concerning directors’ securities transactions in Hong Kong.

Statement I is correct because the Listing Rules require that any proposed changes to a company’s articles of association must conform to these rules and be immediately notified to the Exchange upon a decision being made. This ensures transparency and compliance. Statement II is correct as the Exchange has indeed introduced special requirements for companies incorporated in Bermuda, the Cayman Islands, and the PRC to ensure a level playing field. These requirements address the unique legal and regulatory environments of these jurisdictions. Statement III is incorrect. While ‘A’ shares are traded in Renminbi, ‘B’ shares are also traded in Renminbi in Shanghai Stock Exchange, but in foreign currencies in Shenzhen Stock Exchange. Statement IV is correct. PRC-incorporated companies can list on the Exchange with the permission of the China Securities Regulatory Commission (CSRC), and these shares are known as ‘H’ shares. The Exchange requires adequate communication and cooperation arrangements with the relevant securities regulatory authorities in the PRC and with other exchanges where the PRC issuer’s shares are listed. Therefore, the correct combination is I, II & IV only.

The principle of treating all shareholders even-handedly is a cornerstone of Hong Kong’s regulatory framework for takeovers and mergers, as enshrined in the Codes on Takeovers and Mergers and Share Buy-backs. This principle ensures fairness and protects the interests of all shareholders, particularly minority shareholders, during corporate control transactions. The requirement for a general offer when control changes hands is a direct manifestation of this principle, preventing controlling shareholders from benefiting at the expense of others. The equal access to information provision further reinforces this, prohibiting selective disclosure that could disadvantage certain shareholders. The Hong Kong Securities and Futures Commission (SFC) actively enforces these principles through the Executive and the Takeovers Panel, ensuring that all parties involved in takeovers and mergers adhere to the highest standards of conduct. Directors’ fiduciary duties are also paramount, requiring them to act in the best interests of all shareholders, not just a select few or themselves. The underlying goal is to maintain market integrity and investor confidence by promoting transparency, fairness, and equal treatment in all corporate control transactions. This is consistent with the broader objectives of Hong Kong’s securities regulations, which aim to foster a fair, efficient, and transparent market. The Takeovers Code emphasizes that the spirit of the rules is as important as the letter, and the Executive and Panel have the authority to interpret and apply the rules flexibly to achieve their underlying purposes.

Rule 7.16 of the Hong Kong Listing Rules emphasizes the importance of early consultation with the Exchange regarding the proposed listing method. This ensures that the chosen method aligns with regulatory expectations and the specific circumstances of the issuer. An offer for subscription, as defined by Rule 7.02, involves an issuer offering its own securities to the public, necessitating full underwriting and compliance with Chapter 11 listing document provisions. Offers for sale (Rule 7.06) concern existing securities being offered to the public by holders or allottees, also requiring a Chapter 11-compliant listing document. Placings (Rule 7.09) involve targeted subscriptions or sales to pre-selected individuals, subject to Appendix 6 criteria and Exchange approval, particularly concerning potential public demand. The Exchange’s scrutiny of allotment fairness in tender offers, applicable to both subscription and sale offers, ensures equitable treatment for all investors applying at the same price for the same quantity of securities. The early consultation mandated by Rule 7.16 allows the Exchange to assess whether the proposed method, be it an offer for subscription, offer for sale, or placing, is suitable given the issuer’s profile, market conditions, and potential investor interest, thereby promoting market integrity and investor protection. Failing to consult early could lead to delays, rejection of the listing application, or the need for costly restructuring of the offering. The rule underscores the proactive role of the Exchange in guiding issuers through the listing process and maintaining the quality of the Hong Kong securities market.

The Main Board of the Hong Kong Stock Exchange (HKEX) is designed for established companies with a proven track record and substantial operating history. One of the key requirements for listing on the Main Board is a minimum profit requirement, as detailed in the Listing Rules. Specifically, the profit requirement under Rule 8.05(1)(a) stipulates that a company must demonstrate a profit of not less than HK$20 million in the most recent financial year, and an aggregate profit of not less than HK$30 million for the two financial years immediately preceding that year. This requirement ensures that companies listed on the Main Board have a certain level of financial stability and profitability, providing investors with a degree of confidence. This financial threshold is crucial for maintaining the integrity and reputation of the Main Board as a market for larger, more established companies. The profit requirement is just one aspect of the overall suitability assessment conducted by the HKEX, which also considers factors such as the company’s management, business model, and growth prospects. The Exchange’s roles and responsibilities are detailed in the Listing Rules, which are designed to ensure fair and orderly markets, protect investors, and maintain market integrity. The Listing Division is responsible for administering the Listing Rules and overseeing the listing process. The Listing Committee is responsible for making decisions on listing applications and other matters related to listed companies. The Listing Appeals Committee hears appeals from companies that have been denied listing or have been subject to disciplinary action. Issuers also have responsibilities, including compliance with the Listing Rules and disclosure requirements. Sponsors, Compliance Advisers, and Independent Financial Advisers play important roles in the listing process and in advising listed companies on compliance matters. Directors are responsible for the management of the company and for ensuring that the company complies with all applicable laws and regulations.

The Securities and Futures Ordinance (SFO) empowers the Securities and Futures Commission (SFC) to oversee and regulate various aspects of the securities and futures markets in Hong Kong. One crucial aspect of this regulatory framework is the handling of client assets by licensed corporations. The SFO and its subsidiary legislation, including the Securities and Futures (Client Money) Rules, set out detailed requirements for the segregation, safeguarding, and use of client assets. These rules are designed to protect investors’ interests by ensuring that their assets are not commingled with the firm’s own assets and are available to meet their obligations. Licensed corporations must maintain accurate records of client assets, conduct regular reconciliations, and comply with strict rules on the withdrawal and transfer of client assets. Failure to comply with these requirements can result in disciplinary action by the SFC, including fines, suspension, or revocation of licenses. The SFC actively monitors compliance through on-site inspections and off-site reviews, and takes enforcement action against firms that violate the client asset rules. Understanding these regulations is essential for anyone working in the securities and futures industry in Hong Kong, as they form a cornerstone of investor protection and market integrity. The concept of ‘client assets’ extends beyond just money to include securities and other property held on behalf of clients. The rules also address situations where client assets are held by third parties, such as custodians or sub-custodians, requiring licensed corporations to exercise due diligence in selecting and monitoring these third parties.

The requirements for executive directors and other staff members engaged in corporate finance business in Hong Kong, as outlined in GEM Rule 6.16, are designed to ensure competence and experience in handling IPO transactions and other corporate finance matters.

Statement I is correct because it accurately reflects the requirement that at least two executive directors must be engaged full-time in the corporate finance business in Hong Kong.

Statement II is correct because it accurately reflects the requirement that at least two executive directors must be licensed representatives under the Securities and Futures Ordinance and approved by the Securities and Futures Commission (SFC), unless the sponsor is declared an exempt dealer by the SFC.

Statement III is incorrect because it misrepresents the experience requirement for executive directors. The rule specifies that the executive directors must have acted in a substantive capacity on at least two completed IPO transactions on the Main Board or GEM over the last five years, not three.

Statement IV is correct because it accurately reflects the requirement that at least two other members of staff must be engaged full-time in the corporate finance business in Hong Kong and be licensed representatives under the Securities and Futures Ordinance and approved by the SFC, unless the sponsor is declared an exempt dealer by the SFC.

Therefore, the correct combination is I, II & IV only.

Statement I is correct because the Exchange mandates approval for the issuance of convertible equity securities that can be converted into new or existing securities of the issuer. This requirement ensures transparency and protects the interests of existing shareholders by preventing dilution without proper oversight. Statement II is correct as per Chapter 22 of the GEM Listing Rules, the underlying securities of convertible equity securities must be listed on GEM. This ensures that the market for these securities is within the regulatory framework of GEM. Statement III is correct because, according to Rule 17.01(2), if the shares of a listed issuer or its subsidiary are listed on another exchange or GEM, the more stringent requirements must be adhered to. This ensures that the highest standards of corporate governance and shareholder protection are maintained, regardless of where the shares are primarily listed. Statement IV is correct because, as per Rule 17.04, the granting of options to a director, Chief Executive, substantial shareholder, or their associates requires approval from the independent non-executive directors. This measure is designed to prevent conflicts of interest and ensure that such grants are made in the best interests of the company and its shareholders. Therefore, all the statements are correct.