J. FAQs specific to OTCR

Q1 :

Are bonds and listed debt instruments within scope of the OTCR?

A: The OTCR only covers ordinary shares of a company, or units of a REIT, listed on SEHK.  Other securities, such as bonds and listed debt instruments, are not within scope of the OTCR. 

Q2 : Does a bought and sold note transaction (not recorded on SEHK) need to be reported under the OTCR?  

A: When an RRI (whether as principal or agent) makes a transfer of shares in connection with a bought and sold note transaction, which is an OTC Securities Transaction, the share transfer will be reportable by the RRI under the OTCR. 

Q3 : Is a transfer of shares between two RRIs for the same client, or a transfer of shares between two accounts held by the same client in an RRI, reportable under the OTCR?

A: No, as the transfer of shares is not in connection with an OTC Securities Transaction. 

Q4 : If a client of an RRI deposits a physical certificate for the purposes of selling via SEHK which is reportable under the HKIDR, or a client of an RRI withdraws a physical certificate after buying on SEHK which has been reported under the HKIDR, are the deposit and withdrawal of the physical certificate concerned reportable by the RRI under the OTCR?

A: Yes, provided that the physical certificate relates to ordinary shares of a company, or units of a REIT, listed on SEHK. 

Q5 : Is a deposit or withdrawal of a physical certificate, which does not involve any change of beneficial ownership, reportable under the OTCR? 

A: A deposit to or withdrawal from an RRI of a physical certificate will be reportable by the RRI under the OTCR, regardless of whether any change in beneficial ownership is involved. 

Q6 : An LC or RI provides securities brokerage services for a client (“Client A”) in respect of orders placed through an account opened and maintained for Client A.  On the other hand, the same LC or RI acts as a custodian for another client (“Client B”), i.e. no securities brokerage services are provided for Client B.  Does that LC or RI need to report relevant activities conducted for Client A or Client B under the OTCR?

A: Client A – yes, as the LC or RI acts as an RRI for Client A.  

Client B – no, as the LC or RI does not act as an RRI for Client B. 
 

Q7 : Are corporate actions such as cash offer reportable under the OTCR?

A: If corporate actions do not involve transactions in respect of which stamp duty is chargeable (such as issuance of new shares, open offer, rights issue and privatization, etc.) or are reportable to the SEHK (such as placing of existing shares carried out by an EP), they are not OTC Securities Transactions.  Therefore, share transfers in connection with these corporate actions are not reportable under the OTCR. 

On the other hand, where an RRI (whether as principal or agent) makes a transfer of shares in connection with a cash offer, which is an OTC Securities Transaction, such transfer is reportable by the RRI under the OTCR.   In such case, the RRI has to report to the SFC under the OTCR within three Hong Kong trading days after the share transfer date (i.e. the date on which the RRI has come to the knowledge that acceptance is settled, which is also the share transaction date to be reported under the OTCR). 
 

Last update: 21 Jan 2022

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