Entire Section

  • Independent financial advisers (13.80-13.87)

    • 13.80

      An independent financial adviser appointed under rule 13.39(6)(b), rule 14A.44 or rule 19.05(6)(a)(iii) must take all reasonable steps to satisfy itself that:

      (1) it has a reasonable basis for making the statements required by rule 14A.45; and
      (2) without limiting the generality of paragraph (1) above, there is no reason to believe any of the following information is not true or omits a material fact:
      (a) any information relied on by the independent financial adviser in forming its opinion; or
      (b) any information relied on by any third party expert on whose opinion or advice the independent financial adviser relies in forming its opinion.

      Notes:

      1. For the purposes of this rule, the Exchange expects that the reasonable steps an independent financial adviser will typically perform will include the following:
      (a) obtaining all information and documents of the issuer relevant to an assessment of the fairness and reasonableness of the terms of the transaction, for example, if the transaction involves the purchase or sale of products or services, information and documents showing the prices at which the issuer buys and sells such products and services to independent third parties;
      (b) researching the relevant market and other conditions and trends relevant to the pricing of the transaction;
      (c) reviewing the fairness, reasonableness and completeness of any assumptions or projections relevant to the transaction;
      (d) without limiting the generality of paragraph (c) above, in relation to any third party expert providing an opinion or valuation relevant to the transaction:
      (i) interviewing the expert including as to its expertise and any current or prior relationships with the issuer, other parties to the transaction, and core connected persons of either the issuer or another party to the transaction;
      (ii) reviewing the terms of engagement (having particular regard to the scope of work, whether the scope of work is appropriate to the opinion required to be given and any limitations on the scope of work which might adversely impact on the degree of assurance given by the expert's report, opinion or statement); and
      (iii) where the independent financial adviser is aware the issuer or another party to the transaction has made formal or informal representations to the expert, assessing whether the representations are in accordance with the independent financial adviser's knowledge; and
      (e) if there have been any relevant alternative offers made (for example, offers made recently for the same asset), then reviewing and assessing such alternative offers and the reasons given, if any, by the management for rejecting these offers.
      2. The Exchange expects the independent financial adviser will ensure the letter referred to at rule 14A.45 takes account of the following principles:
      (a) the source for any fact which is material to an argument should be clearly stated, including sufficient detail to enable the significance of the fact to be assessed; however, if the fact has been included in a document recently sent to shareholders, an appropriate cross reference may instead be made;
      (b) a quotation (for example, from a newspaper or a stockbroker circular) should not be used out of context and details of the origin should be included. Since quotations will necessarily carry the implication that they are endorsed by the independent financial adviser, quotations should not be used unless the independent financial adviser has corroborated or substantiated them;
      (c) pictorial representations, charts, graphs and diagrams should be presented without distortion and, when relevant, should be to scale; and
      (d) any comparables referred to in a document must be a fair and representative sample. The bases for compiling such comparables must be clearly stated in the document.

    • 13.81

      The issuer must:

      (1) afford any independent financial adviser it appoints pursuant to rule 13.39(6)(b), rule 14A.44 or rule 19.05(6)(a)(iii) full access at all times to all persons, premises and documents relevant to the independent financial adviser's performance of its duties as set out in the Exchange Listing Rules. In particular, terms of engagement with experts retained to perform services related to the transaction should contain clauses entitling the independent financial adviser access to:
      (a) any such expert;
      (b) the expert's reports, draft reports (both written and oral), and terms of engagement;
      (c) information provided to or relied on by the expert;
      (d) information provided by the expert to the Exchange or Commission; and
      (e) all other correspondence exchanged between the issuer or its agents and the expert or between the expert, the issuer and the Exchange or Commission;
      Note: The Exchange expects that access to documents for the purposes of this rule would include the right to take copies of the documents without charge.
      (2) keep the independent financial adviser it appoints informed of any material change to any information previously given to or accessed by the independent financial adviser pursuant to paragraph (1) above; and
      (3) provide to or procure for the independent financial adviser all necessary consents to the provision of the information referred to in paragraphs (1) and (2) above to the independent financial adviser.

    • 13.82

      An independent financial adviser must be appropriately licensed by the Commission and must discharge its responsibilities with due care and skill.

    • 13.83

      An independent financial adviser must perform its duties with impartiality.

    • 13.84

      An independent financial adviser must be independent from any issuer for whom it acts. An independent financial adviser is not independent if any of the following circumstances exist as at the time of making the declaration required by rule 13.85(1):

      (1) the IFA group and any director or close associate of a director of the independent financial adviser holds, directly or indirectly, in aggregate more than 5% of the number of issued shares of the issuer, another party to the transaction, or a close associate or core connected person of the issuer or another party to the transaction;
      (1A) in the case of a connected transaction, the independent financial adviser holds more than 5% of the number of issued shares of an associate of another party to the transaction;
      (2) any member of the IFA group or any director or close associate of a director of the independent financial adviser is a close associate or core connected person of the issuer or another party to the transaction;
      (2A) in the case of a connected transaction, the independent financial adviser is an associate of another party to the transaction;
      (3) any of the following exceeds 10% of the total assets shown in the latest consolidated financial statements of the independent financial adviser's ultimate holding company or, where there is no ultimate holding company, the independent financial adviser:
      (a) the aggregate of:
      (i) amounts due to the IFA group from:
      (A) the issuer;
      (B) its subsidiaries;
      (C) its controlling shareholder; and
      (D) any close associates of its controlling shareholder; and
      (ii) all guarantees given by the IFA group on behalf of:
      (A) the issuer;
      (B) its subsidiaries;
      (C) its controlling shareholder; and
      (D) any close associates of its controlling shareholder;
      (b) the aggregate of:
      (i) amounts due from the IFA group to:
      (A) the issuer;
      (B) its subsidiaries; and
      (C) its controlling shareholder; and
      (ii) all guarantees given on behalf of the IFA group by:
      (A) the issuer;
      (B) its subsidiaries; and
      (C) its controlling shareholder;
      (c) the aggregate of:
      (i) amounts due from the IFA group to any of the following (referred to in this rule as "the Other Parties"):
      (A) another party to the transaction;
      (B) any holding company of another party to the transaction;
      (C) any subsidiary of any holding company of another party to the transaction;
      (D) any controlling shareholder of:
      (1) another party to the transaction; or
      (2) any holding company of another party to the transaction; and
      (E) any close associate of any controlling shareholder referred to in paragraph (D) above; and
      (ii) all guarantees given by any of the Other Parties on behalf of the IFA group; and
      (d) the aggregate of:
      (i) amounts due to the IFA group from any of the Other Parties; and
      (ii) all guarantees given by the IFA group on behalf of any of the Other Parties;
      (4) any of the following has a current business relationship with the issuer or another party to the transaction, or a director, subsidiary, holding company or substantial shareholder of the issuer or another party to the transaction, which would be reasonably considered to affect the independent financial adviser's independence in performing its duties as set out in the Exchange Listing Rules, or might reasonably give rise to a perception that the independent financial adviser's independence would be so affected, except where that relationship arises under the independent financial adviser's appointment to provide the advice:
      (a) any member of the IFA group;
      (b) an employee of the independent financial adviser who is directly engaged in providing the advice to the issuer;
      (c) a close associate of an employee of the independent financial adviser who is directly engaged in providing the advice to the issuer;
      (d) a director of any member of the IFA group; or
      (e) a close associate of a director of any member of the IFA group;
      (5) within 2 years prior to making the declaration pursuant to rule 13.85(1):
      (a) a member of the IFA group has served as a financial adviser to:
      (i) the issuer or its subsidiaries;
      (ii) another party to the transaction or its subsidiaries; or
      (iii) a core connected person of the issuer or another party to the transaction; or
      (b) without limiting paragraph (a), an employee or a director of the independent financial adviser who is directly engaged in providing the subject advice to the issuer:
      (i) was employed by or was a director of another firm that served as a financial adviser to any of the entities referred to at paragraphs (a)(i) to (a) (iii) above; and
      (ii) in that capacity, was directly engaged in the provision of financial advice to the issuer or another party to the transaction;
      (6) the independent financial adviser or a member of the IFA group is the issuer's auditor or reporting accountant.

      Notes:
      1. In addition to it being a breach of the Exchange Listing Rules, if it comes to the Exchange's attention that an independent financial adviser is not independent, the Exchange will not accept documents produced by that independent financial adviser for any purpose required under the Exchange Listing Rules in relation to the subject transaction.
      2. In calculating the percentage figure of shares that it holds or will hold for the purposes of sub-paragraphs (1), (2) and (4), an entity is not required to include an interest:
      (a) held by an investment entity on behalf of its discretionary clients;
      (b) held by a fund manager on a non-discretionary basis such as a managed account or managed fund;
      (c) held in a market-making capacity;
      (d) held in a custodial capacity;
      (e) in shares that would be disregarded for the purposes of Divisions 2 to 4 of Part XV of the Securities and Futures Ordinance under section 323 of that Ordinance; or
      (f) in shares held by a member of the entity's group that is an investment manager whose interest would not be aggregated with its holding company under section 316(2) of the Securities and Futures Ordinance by reason of the operation of section 316(5) of that Ordinance.
      For these purposes "investment manager" has the meaning given to it in section 316(7) of the Securities and Futures Ordinance.
      3. For the purposes of this rule, ultimate holding company means a holding company that itself does not have a holding company.

    • 13.85

      No later than the earlier of the independent financial adviser agreeing its terms of engagement with the issuer and the independent financial adviser commencing work as independent financial adviser to the issuer, the independent financial adviser must submit to the Exchange:

      (1) a declaration in the prescribed form set out in Appendix 21 to the effect that the independent financial adviser is independent, including a statement addressing each of the circumstances set out in rule 13.84; and
      (2) an undertaking, in the terms set out in Appendix 22 to:
      (a) comply with the Listing Rules; and
      (b) co-operate in any investigation conducted by the Listing Division and/or the Listing Committee of the Exchange, including answering promptly and openly any questions addressed to the independent financial adviser, promptly producing the originals or copies of any relevant documents and attending before any meeting or hearing at which the independent financial adviser is requested to appear.

    • 13.86

      Where an independent financial adviser or issuer becomes aware of a change in the circumstances set out in the declaration required by rule 13.85(1) during the period the independent financial adviser is engaged by the issuer, the independent financial adviser or issuer must notify the Exchange as soon as possible upon that change occurring.

    • 13.87

      Insofar as the Exchange Listing Rules impose a higher standard of conduct on independent financial advisers than that set out in the Commission's Corporate Finance Adviser Code of Conduct, the Code of Conduct, the Takeovers Code, the Share Buy-backs Code and all other relevant codes and guidelines applicable to them, the Exchange Listing Rules will prevail.

      Note: The Exchange also reminds independent financial advisers of their other statutory obligations including but not limited to those under the Securities and Futures Ordinance.