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. 
 

Last update: 26 Nov 2021

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