Securities & Futures Commission of Hong Kong

Contract Notes, Statements of Accounts and Receipts Rules

Q1:

If an intermediary does not repledge any securities collateral, can the firm disclose the non-repledging status of the firm in client statements?

A:

There is no specific requirement for the intermediaries to disclose their non-repledging status in client statements.

Section 11(3A) of CNR applies to intermediaries which are licensed for dealing in securities or securities margin financing where:

  1. the intermediary or an associated entity of such intermediary has held securities collateral at any time during a monthly accounting period; and
  2. at any time during that monthly accounting period, the intermediary or an associated entity of such intermediary has repledged securities collateral of the intermediary.

Intermediaries that do not have the practice of repledging clients’ securities collateral are not subject to section 11(3A) of CNR. Firms wishing to make any statement in their client statements are reminded to ensure the accuracy of all the representations made in their communications to clients.

Section reference: Section 11(3A)

Q2:

Is there any standard wording for the disclosures to be made in monthly client statements as required under Section 11(3A)?

A:

No. Section 11(3A) sets out the information that needs to be disclosed in the monthly client statements to margin clients, but does not provide specific wording.

Section reference: Section 11(3A)

Q3:

Are the disclosure requirements under section 11(3A) of CNR applicable to monthly statements for cash clients?

A:

The requirements under section 11(3A) of CNR only apply to client accounts for which the intermediary or an associated entity of the intermediary has held securities collateral at any time during a monthly accounting period. In general, cash clients’ securities are held by brokers for safe custody only and are not securities collateral. Accordingly, the monthly statements for cash clients are not subject to the above requirements.

Section reference: Section 11(3A)

Q4:

If an intermediary to which this section applies has repledged client’s securities collateral but not utilised the credit facilities secured by those collateral, does the firm still have to make the disclosure on monthly client statements?

A:

Yes. The application of this section is not based on whether the intermediary has utilised the credit facility secured by repledging clients’ securities collateral or not.

Section reference: Section 11(3A)

Q5:

If an intermediary to which this section applies obtained written authorisation from margin clients to repledge their collateral but has not repledged any collateral, is it required to make the disclosure on monthly client statements?

A:

No.

Section reference: Section 11(3A)

Q6:

Is section 11(3A) only applicable to monthly statements provided to those margin clients whose collateral have been repledged?

A:

No, the disclosure required under section 11(3A) of CNR should be made in the monthly statements to all those clients for whom the intermediary or an associated entity of the intermediary has held securities collateral at any time during that monthly accounting period.

Section reference: Section 11(3A)

Q7:

Is it necessary to make the disclosure required under section 11(3A) of CNR in contract note and daily client statements?

A:

No, the disclosure is only required in monthly client statements.

Section reference: Section 11(3A)

3.9670 s