Chapter 6

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Question:

The Financial Institutions (Resolution) Ordinance (Cap.628)("FIRO") vests in the three sectoral resolution authorities (being the Monetary Authority, the SFC or the Insurance Authority) with a range of powers to enable orderly resolution of a non-viable, systemically important financial institution for the purpose of maintaining financial stability, while seeking to protect public funds.

In particular, Part 9 of the FIRO empowers a resolution authority to temporarily defer certain entities' disclosure obligations under section 307B of the SFO in certain circumstances (including that the disclosure would cause or contribute to the non-viability of the entity or its group company or impede the ability of the resolution authority to achieve orderly resolution), and in that case, the entities' disclosure obligations under the Rules will also be deferred automatically.

Where an issuer's disclosure obligations are deferred under the FIRO, will dealings in securities of such issuer be suspended?

Answer:

There is no automatic suspension of dealings in securities of such issuer, but the FIRO provides that the resolution authority may direct the Exchange to suspend, or not to suspend, dealings in securities of an issuer despite its disclosure obligations have been deferred under the FIRO.

The resolution authority must consult the SFC (if the SFC is not the resolution authority) before its exercise of any powers to defer disclosure obligations or suspend, or not suspend, dealings to enable the SFC's views to be ascertained (including e.g. on the effects of deferral, suspension or non-suspension on the market, and financial stability).

Any decision to exercise such powers would not be taken lightly by a resolution authority given their potential risks and ramifications for the stability and effective functioning of the financial system. Ultimately, the extent to which the resolution authority would use any of these powers on failure of an institution would depend upon its assessment of the risks posed to the orderly resolution, its balancing of the resolution objectives in the context of securing its financial stability objectives as set out in the FIRO and the operational mechanics (to be developed by the resolution authorities) for the implementation of the FIRO stabilization options.

FAQ Series N/A, FAQ No. 005-2017
LR reference: Main Board Rule 6.01 / GEM Rule 9.01
Released on 20/10/2017

Question:

Part 9 of the FIRO, as currently drafted, does not cover suspension of dealings in structured products listed under Chapter 15A of the Main Board Listing Rules that are cash settled only.

What will happen to dealings in the cash-settled structured products of an issuer that is subject to Part 9 of the FIRO in the three scenarios below?

(a) Prior to the application of a stabilization option under the FIRO, where the relevant issuer also has securities as defined under the FIRO (e.g. shares) listed on the Exchange;
(b) Prior to the application of a stabilization option under the FIRO, where the relevant issuer does not have any securities as defined under the FIRO (e.g. shares) listed on the Exchange (i.e. the issuer issues cash-settled structured products only); or
(c) When and if a "bail-in" under the FIRO is in effect.

Answer:

(a) Where the relevant resolution authority has served a direction under the FIRO on the Exchange to suspend, or not to suspend, the issuer's securities as defined under the FIRO (e.g. shares), the Exchange shall exercise its power under Main Board Rule 6.01 to suspend dealings, or refrain from directing a suspension of dealings, in the issuer's cash-settled structured products in the same way.
(b) The relevant resolution authority shall inform the Exchange when the issuer's disclosure obligations have been deferred under the FIRO, and request the Exchange to suspend, or not to suspend, dealings in the issuer's cash-settled structured products.

The Exchange shall exercise its power under Main Board Rule 6.01 to suspend dealings, or refrain from directing a suspension of dealings, upon receipt of the resolution authority's request.
(c) The relevant resolution authority shall inform the Exchange when and if a "bail-in" under the FIRO is in effect and the issuer's disclosure obligations are suspended by force of law pursuant to section 153 of the FIRO.

The Exchange shall exercise its power under Main Board Rule 6.01 to suspend dealings upon receipt of the notice.
FAQ Series N/A, FAQ No. 007-2017
LR reference: Main Board Rule 6.01
Released on 20/10/2017

Question:

Has there been any change in the procedure for requesting a trading halt or suspension?

Answer:

The procedure for requesting a trading halt or suspension has not changed as such. As before, it will be necessary to liaise with the Listing Division of the HKEx and make a written request stating the specific reasons for requesting a trading halt or suspension. If appropriate, the Listing Division of the HKEx will arrange for trading in the issuer's securities to be halted or suspended.

The change is with regard to the way in which the trading halt or suspension is notified to the market. Under the pre-existing procedure, a trading halt or suspension is first notified to the market by means of a short notice prepared by HKEx which is published on the HKEx website. Under the new information dissemination model, the market will be notified by means of a trading halt or suspension announcement which is prepared by the issuer and submitted through the e-Submission System for publication on the HKEx website.

Where the announcement has already been submitted by the issuer for publication, HKEx will publish this announcement immediately via the HKEx website following a trading halt or suspension. If the issuer has not submitted the announcement for publication before the trading halt or suspension, the issuer must do so as soon as possible after the trading halt or suspension has been effected.

The announcement must also be published on the issuer's own website (if any), but does not have to be published in the newspapers.

FAQ Series 3, FAQ No. 139
LR reference: Main Board Rules 6.02, 6.03 / GEM Rules 9.06, 9.07, 9.08
Released on 22/3/2007 (Updated on 2/1/2013)

Question:

What is the trading halt/ suspension policy applicable to Main Board and GEM issuers in respect of publication of announcements containing inside information and/or notifiable transactions?

Answer:

Trading in the securities of an issuer may be halted or suspended due to publication failure (i.e. to publish an announcement on HKEx websites) where the subject matter of the announcement is information discloseable under Listing Rules MB 13.09/ GEM 17.10 or relates to a notifiable transaction and trading halt or suspension is required under Listing Rules MB 14.37/ GEM 19.37. This is consistent with the principle set out in Chapter 6 of Main Board Rules/ Chapter 9 of GEM Rules on trading halts and suspensions, i.e. that halt or suspension is only required where the HKEx considers it necessary for the protection of the investor or the maintenance of an orderly market.

Where an obligation to issue an announcement containing inside information has arisen for an issuer, it should publish the announcement during the next available publication window. For example, where the issuer has signed an agreement in relation to a notifiable transaction that is inside information after trading hours on a normal business day, and an announcement is published on the HKEx website by 8.30 a.m. of the next business day (i.e. either during the publication windows from 4.30 p.m. to 11.00 p.m. of that business day, or between 6.00 a.m. to 8.30 a.m. of the next business day), no trading halt or suspension would be necessary. Similarly, where an agreement is signed after the morning trading session and an announcement is published on the HKEx website between 12.00 noon to 12.30 p.m. of the same business day, no trading halt or suspension is necessary. In both circumstances where an announcement cannot be published before the next trading session, a halt or suspension in the trading of the issuer's securities would be required until commencement of the trading session (morning or afternoon) after the publication of the announcement. For example, where the announcement is published during the 12.00 noon to 12.30 p.m. publication window of the next business day, the issuer may apply for resumption of trading in its securities at 1.00 p.m.

Where an issuer's obligation to publish an announcement relating to inside information is triggered during trading hours (for example, where confidentiality cannot be maintained and an obligation to publish an announcement on inside information arises under Listing Rule MB 13.09/ GEM 17.10 or in the circumstances described in Listing Rules MB 14.37 / GEM 19.37), the issuer should request a halt or suspension in trading of its securities, and publish an announcement as soon as possible during the next publication window. Resumption in trading of the issuer's securities may take place during the commencement of the next trading session after the publication of the announcement.

A resumption announcement should clearly set out that an application will be made for resumption in the trading of securities and the expected time of resumption (i.e. at the commencement of the next trading session after the publication of the announcement).

Issuers are reminded of their obligations to submit an announcement for clearance by the Exchange before publication where the subject matter of the announcement requires pre-vetting under the Listing Rules. Please refer to the Guide on Pre-vetting requirements and Selection of Headline Categories for Announcements at http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/listpp/eppguid/epp.htm which sets out categories of announcements requiring pre-vetting.

Issuers are also reminded that they should manage their affairs, particularly with regard to the signing of agreements, to ensure that there will be continuous and informed trading of their securities save in exceptional circumstances. It follows that, as far as practicable, issuers should seek to ensure that complex and lengthy announcements are disseminated as soon as possible during either the lunchtime publication window or outside trading hours to allow investors adequate time to consider the content of such disclosures.

FAQ Series 3, FAQ No. 178
LR reference: Main Board Rules Chapter 6, 13.09, 13.10A, 14.37 / GEM Rules Chapter 9, 17.10, 17.11A, 19.37
Released on 22/3/2007 (Updated on 25/7/2016)

Question:

What is the trading suspension arrangement for issuers with A shares and H shares listed on SSE / SZSE and SEHK?

Answer:

There will be no change in the general policy for trading suspension of A+H issuers as a result of the implementation of Shanghai and Shenzhen Connect:

(a) Suspension arrangement
(i) Suspension pending release of inside or material information or clarification to address false market concern

Where an A+H issuer has any inside information1 or material information2 or where there is concern about the possible development of a false market3, the issuer's A and H shares will be suspended in both markets to prevent potential or actual market disorder.

Note
1: See SEHK Listing Rule 13.09
2: See SSE listing rules 2.3 and 2.10 / SZSE listing rule 2.7
3: See SEHK Listing Rule 13.10
(ii) Suspension due to other reasons (i.e. other than those mentioned in (i) above)

In other specific circumstances where trading suspension is required in one market, and not the other, under the respective home market rules, the current practice will continue to apply. They include:

Reasons for suspension SSE / SZSE SEHK
Non-routine suspension
Insufficient public float Suspend after the public float falls below the minimum requirement4 for 20 consecutive days Suspend when the public float falls below the minimum requirement4 and there is a lack of open market in the listed securities
Delay in publication of annual results Suspend when the issuer fails to publish the annual report by the deadline (which is 4 months from the year end date) Suspend when the issuer fails to publish the results announcement by the deadline (which is 3 months from the year end date)
Failure to meet continuing listing criteria Listing may be suspended if the issuer fails to meet financial requirements after it is put under delisting risk warning:
•   Net loss for the latest 3 consecutive years; or
•   Net liability in the latest 2 consecutive years; or
•   Revenue less than RMB10 million for the latest 2 consecutive years; or
•   Auditors issued a disclaimer opinion or adverse opinion on its financial statements for the latest 2 consecutive years
Suspend if the issuer fails to maintain sufficient assets or operations for listing
Material asset restructuring5,7
(a) An issuer announces that it may undertake a possible material asset restructuring
(a) Suspend for not more than three months (unless an extension is permitted) when the possible material asset restructuring is in contemplation
(a) No suspension where the announcement contains inside information concerning the possible material asset restructuring
(b) The issuer convenes a board meeting and announces details of its material asset restructuring proposal
(b) Suspend for not more than 10 days when the announcement is subject to post-vetting by SSE / SZSE
(b) No suspension after the announcement of the proposed transaction.6
(c) The issuer publishes an announcement upon the receipt of the CSRC's notice in relation to the vetting of the issuer's material asset restructuring proposal
(c) Suspend during the vetting period
(c) No suspension
Non-public issuance of new shares7 Suspend for not more than 10 days (unless an extension is permitted) when an issuer announces that it may undertake a possible issuance of new shares No suspension where the announcement contains inside information concerning the possible issuance of new shares
Other material matters7 Suspend for not more than 10 days when an issuer announces that it is contemplating material matters (e.g. change in control, material contract, acquisition or disposal subject to shareholder approval, external investment) No suspension where the announcement contains inside information concerning the possible material matters
Routine suspension
Rights issue Suspend during the acceptance period No suspension
Delay in publication of quarterly results Suspend for 1 day if the issuer fails to publish quarterly report by the due date No suspension
(There is no requirement under the SEHK Listing Rules for Main Board issuers to publish quarterly results.)
Issuers under delisting risk warnings Suspend for 1 day if the issuer is put under the delisting risk warning (*ST) or other kinds of special treatment (ST) under the SSE / SZSE rules No suspension

Note
4: Under the SSE/SZSE listing rules, an issuer shall maintain a public of at least 25% of the total issued share capital (or 10% if the issuer's share capital exceeds RMB400 million).

Under SEHK Listing Rules, an issuer shall maintain a public of at least 25% of the total issued share capital (or a lower percentage if wavier was previously granted by SEHK).
5: See the "Measures for the Administration of the Material Asset Restructurings of Listed Companies" issued by the CSRC
6: Issuers are reminded that if the proposed transaction constitutes a very substantial disposal, very substantial acquisition or reverse takeover under the SEHK Listing Rules, the issuer should submit the draft announcement for the transaction to SEHK for pre-vetting.
7: See the "Guidelines on trading suspension and resumption for listed companies in contemplation of material matters" 《上市公司籌劃重大事項停復牌業務指引》 and the "Disclosure memorandum for Main Board no.9 - Listed companies' trading suspension and resumption" 《主板信息披露業務備忘錄第9 號——上市公司停復牌業務》 issued by SSE and SZSE respectively
(b) Communications with exchanges

A+H issuers are reminded that they must notify both SEHK and SSE / SZSE as soon as possible after they become aware of any matter that may require a trading suspension of their shares on SEHK and/or SSE / SZSE. The issuers should, to the extent practicable, make early contact with SEHK and SSE / SZSE to allow sufficient time for each exchange to deal with the matter before the markets open.
(c) Disclosure in announcements

Where trading is to be suspended in one market only (see paragraph (a)(ii) above), timely disclosure of the suspension details (including the time of suspension and the reason for the suspension) in the other market is necessary to ensure that shares in the other market can continue to be traded in an orderly manner.

FAQ Series 29, FAQ No. 5
LR reference: Main Board Rules Chapter 6
Released on 14/11/2014 (Updated on 13/07/2018)

Question:

Once suspended, will trading resumption of an issuer's A and H shares take place at the same time?

Answer:

(a) Resumption arrangement
(i) Normally, if an issuer's A and H shares are suspended due to inside or material information or false market concern, trading in the shares will resume in both markets at the same time after the issuer has published an appropriate announcement through SEHK and SSE / SZSE.
(ii) Nevertheless, as mentioned in paragraph (a)(ii) under question 5, there may be specific circumstances where trading suspension is required in one market, and not the other, under the respective home market rules. In those circumstances, trading in the issuer's shares may resume in one market when it has satisfied the requirements of that market, but remain suspended in the other market under its rules.
(b) Communication with exchanges

The suspended issuer should keep both SEHK and SSE / SZSE informed of its developments and should allow sufficient time for the exchanges to decide whether and when trading can be resumed.
(c) Disclosure in announcements

Where trading is to be resumed in one market only (see paragraph (a)(ii) above), the issuer should publish an announcement setting out the reasons for the continued suspension of its shares in the other market.

FAQ Series 29, FAQ No. 6
LR reference: Main Board Rule Chapter 6
Released on 14/11/2014 (Updated on 04/11/2016)