Hong Kong’s Securities and Futures Commission (SFC) will introduce a new system for mandatory electronic filing of disclosure of interests notifications (DI notices), which will come into effect on 3 July 2017. From that day onwards, market participants are required to submit DI notices electronically through the new Disclosure of Interests Online System (DION System).
The changes will affect how substantial shareholders, directors and chief executives of listed corporations and even listed corporations themselves comply with their disclosure / notification obligations under Part XV Securities and Futures Ordinance (SFO) – though the changes will not otherwise affect the operation of Part XV SFO.
Market participants are advised to familiarise themselves with the new filing regime ahead of the 3 July 2017 commencement date and to start thinking about necessary changes to their DI notice compliance practices and procedures.
What is changing?
The DION System
Currently, substantial shareholders, directors and chief executives of listed corporations are required to submit DI notices to the relevant listed corporation and the Stock Exchange of Hong Kong Limited (SEHK) by hand, post, fax or email. However, once the electronic filing regime becomes effective, filers will need to use the DION System to discharge their disclosure obligation,, though the change in filing regime will be subject to a three-month transition period (as described below). Persons who are party to an agreement to acquire interests in a listed corporation (commonly known as a “section 317 agreement”) will be required to submit the relevant documentation via the DION System as well.
The DION System will be introduced by Hong Kong Exchanges and Clearing Limited (HKEx) and any disclosure of interests information, including DI notices and relevant documentation pertaining to section 317 agreements, will be maintained and published on the HKEx website and accessible by the public. Under the current regime, section 317 agreements submitted by filers (or extracts thereof) are not made publicly available on the HKEx website.
It should be noted that there are no other changes to filers’ disclosure obligations under Part XV SFO.
New prescribed forms and codes
New prescribed forms for the DI notices were published by the Securities and Futures Commission (SFC) in May 2017 and will replace the existing forms when the new regime comes into operation. The SFC has also introduced a new form for listed corporations to report the results of their investigations of share ownership under section 329 SFO. The public may view the new prescribed forms on the SFC’s website.
Moreover, to improve the accuracy of the information provided in the DI notices, the SFC has introduced new event codes for the new forms. A full list of the new event codes can be found here.
When should I start using the new system?
Events on or after 3 July 2017
For events triggering disclosure obligations which occur on or after 3 July 2017, filers should use the new prescribed forms and submit DI notices and reports electronically via the DION System.
Helpfully, filers will no longer need to submit the DI notices to the relevant listed corporation or to the SFC, as both will be notified by the SEHK upon submission of the DI notices.
Events before 3 July 2017
If the events triggering disclosure obligations occur before 3 July 2017, filers should use the existing prescribed forms and submit DI notices to the relevant listed corporation and the SEHK by hand, post, fax or email.
There will be a three-month transition period from 3 July 2017 to enable a smooth transition to the DION System and to reduce potential issues with the new filing regime. During the transition period, filers may submit DI notices using the new forms and the DION System, or continue to use the existing forms and submit them to the SEHK and the relevant listed corporation by hand, post, fax or email.
The SFC has expressly stated that it is unlikely to prosecute a breach of the disclosure obligations under Part XV SFO solely based on an incorrect use of a prescribed form or submission method during the transition period. Nonetheless, substantial shareholders, directors and chief executives of listed corporations are advised to familiarise themselves with the new filing regime by adopting the new system early.
Under the current regime, listed corporations are required to notify or deliver copies of information or reports they receive in response to share ownership investigations to the SFC and the SEHK. Additionally, if a listed corporation is an authorized institution (AI) or the holding company of an AI, the Hong Kong Monetary Authority (HKMA) must be notified as well. Such notifications can be made by hand, post, fax or email, and there is no specified form.
Listed corporations which are not AIs
Once mandatory electronic filing becomes effective, such notifications and reports can only be made to the SFC and the SEHK via the DION System.
Listed corporations which are AIs
With effect from 3 July 2017, listed AIs and listed holding companies of AIs are required to file the relevant notifications and reports electronically with the HKMA via HKMA’s Supervisory Communication Website. A separate sub-section titled “Securities and Futures Ordinance” under the “Notification” section of the Supervisory Communication Website will be created for this purpose.
A copy of HKMA’s circular regarding the arrangements for mandatory electronic filing dated 5 May 2017 can be found here.