SFC PRESS RELEASE
21 February 2003
TO THE BUSINESS EDITOR
FOR IMMEDIATE RELEASE
Guidelines to Facilitate Offers of Shares and Debentures
The SFC announces the gazettal today of three sets of guidelines facilitating offers of shares
and debentures.
The guidelines are made in response to market requests after taking into account investor
protection considerations. They have been developed in close consultation with members of
the Working Group on Debt Market and the Securities Offering Issues sub-group of the
Government’s Financial Market Development Task Force (Note 1) and other securities
market practitioners.
The guidelines constitute a facilitative interpretation of particular provisions of the current
prospectus regime and make adjustments to current market practices and procedural
requirements in order to facilitate the conduct of a public offering of shares or debentures.
No legislative changes are required for their implementation.
The SFC will continue to work with market participants to identify and remove restrictions
and bottlenecks under the existing statutory and regulatory regimes in respect of securities
offerings.
The three guidelines, which have become effective immediately, are described below.
1.
Guidelines on use of offer awareness and summary disclosure materials in offerings of
shares and debentures under the Companies Ordinance
These guidelines relate to the content and manner of publication of certain publicity and
disclosure materials that may be issued to the public in Hong Kong in connection with an
offer of shares or debentures made by a prospectus. The guidelines clarify the SFC’s view
regarding the treatment of such materials.
Offer awareness materials
The SFC considers that certain publicity materials that are issued by the issuer of a
prospectus and designed only to raise investor awareness of a public offer of shares or
debentures will not constitute a prospectus or an extract from or abridged version of a
prospectus within sections 2 and 38B, respectively, of the Companies Ordinance (CO), or a
prohibited advertisement within section 4(1) of the Protection of Investors Ordinance.
SFC Website: http://www.hksfc.org.hk
Electronic Investor Resources Centre: http://www.hkeirc.org
Such materials may assist the issuer in the efficient conduct of the offer and facilitate greater
retail investor participation. Potential investors would have more time to arrange their
financial and other affairs in order to participate in an offer.
In the guidelines, the SFC specifies requirements concerning the form and manner of
publication for such publicity materials. They must be strictly limited to giving procedural
and administrative information regarding the offer, and should not promote the issuer or the
offer. Certain legends clarifying that the publicity material does not constitute an offer and
warning potential investors to read the prospectus for detailed information before making an
investment decision will be required.
The guidelines recommend that publicity of this kind should not be issued earlier than 14
days before the launch of an offer.
Materials that comply with the prescribed requirements will constitute “offer awareness
materials” for the purposes of the guidelines. The SFC does not intend to pre-vet such
materials.
Summary disclosure materials
The SFC also considers that disclosure materials issued by the issuer of a prospectus that
summarise or highlight key information concerning a public offer should be encouraged.
These materials, commonly described as mini-prospectuses or fact sheets, are likely to help
investors understand the information contained in the prospectus.
The SFC considers that these documents will normally amount to an extract from or abridged
version of a prospectus, rather than a full prospectus. They therefore will not need to be
registered with the Registrar of Companies. However, such documents must be expressly
authorised by the SFC prior to issue.
In the guidelines, the SFC specifies requirements concerning the form and manner of
publication for summary disclosure materials.
The guidelines provide, among other things, that summary disclosure materials should not
include any substantive information not contained in the full prospectus and should contain a
clear statement as to whether they contain a fair summary of the prospectus information.
Certain legends clarifying that the disclosure material does not constitute an offer and
warning potential investors to read the prospectus will be required.
SFC Website: http://www.hksfc.org.hk
Electronic Investor Resources Centre: http://www.hkeirc.org
The guidelines would allow mini-prospectuses and fact sheets to be made available or
distributed from the time of issue of the prospectus.
2.
Guidelines on using a “dual prospectus” structure to conduct programme offers of
shares or debentures requiring a prospectus under the Companies Ordinance (Cap.
32)
The guidelines outline the SFC’s regulatory approach with respect to offers of shares or
debentures on a “repeat” or “programme” basis using separately registered programme and
issue prospectuses.
The CO does not expressly provide for repeat or programme offering structures which enable
offers to be made on a continuous basis or through successive tranches. It makes no
concession for offers where prospectuses may be issued frequently or in the ordinary course
of a company’s business (and in particular by the financial industry). It does not expressly
contemplate the filing of an offer-specific “issue” section of a prospectus, which updates a
document (namely, the “programme” section of the prospectus containing, among other
things, financial and other generic information on the issuer, the mechanics of the programme
and risk factors) that was previously registered.
The guidelines describe a “dual prospectus” structure which allows registration of the
programme section and issue section as separate prospectuses, referred to as the “programme
prospectus” and the “issue prospectus”.
The structure will facilitate continuous offerings of shares and debentures, by removing the
need to re-register the document containing the programme information. This reduces
administrative hurdles, such as the need to obtain a fresh copy of an expert’s consent to a
report appearing in a programme prospectus.
The guidelines include a number of investor protection safeguards to ensure investors receive
all necessary information relating to an offer. For example, they provide that each issue
prospectus and application form must draw attention to the existence of the programme
prospectus and indicate where a copy may be obtained. Issuers of prospectuses must also
make adequate arrangements to ensure potential investors have convenient and timely access
to all constituent prospectuses, free of charge, and that application instructions are not
accepted without investors’ confirmation that they have read or had access to all constituent
prospectuses.
SFC Website: http://www.hksfc.org.hk
Electronic Investor Resources Centre: http://www.hkeirc.org
3.
Guidelines on applying for a relaxation from procedural formalities to be fulfilled
upon registration of a prospectus under the Companies Ordinance (Cap. 32)
The CO provides that for the purpose of authorising registration, a prospectus must be printed
on A4 paper of a certain thickness and weight. Consent to the issue of the prospectus from
any person as an expert is also required. The current practice is to submit to the SFC (or the
Stock Exchange, in the case of listed offerings) the definitive prospectus (being the version
that is distributed to the public) satisfying these requirements together with the original of any
expert’s consent letter.
Market practitioners have commented in some cases that, because of their particular
arrangements for printing the definitive prospectus or the use of overseas-based experts, the
requirements introduce an additional level of complexity into the process. The guidelines
aim to address these concerns.
The guidelines set out relaxations which will apply if the issuer or its adviser satisfies the
SFC that administrative difficulties will otherwise unjustifiably result. In such cases, faxed
copies of experts’ consent letters and a bulk print proof (being the version approved by the
issuer for bulk printing) of the prospectus may be accepted for registration under the CO.
The relaxation will assist those issuers that encounter timing difficulties at the stage
immediately preceding registration of a prospectus.
All three Guidelines are available at the SFC office and can be downloaded from the SFC
website.
Ends
Notes to Editor:
1. The Working Group on Debt Market was established in December 2001 to pursue
initiatives for the development of the retail debt market and reports to the Financial
Market Development Task Force, which is chaired by the Secretary for Financial
Services and the Treasury. The Securities Offering Issues sub-group was set up under
the Securities and Futures Market Development Working Group of the Task Force.
2. For enquiries, please contact C K Chan at 2842 7624 or Ernest Lau at 2840 9470.
CC\03PR28
SFC Website: http://www.hksfc.org.hk
Electronic Investor Resources Centre: http://www.hkeirc.org