SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - CHAPTER 420 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - LONG TITLE Long title (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 This Ordinance was repealed by s. 406(1) of 5 of 2002. The savings, transitional and supplemental arrangements are set out in Part 1 of Schedule 10 to the Securities and Futures Ordinance (Cap 571). SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - LONG TITLE Long title VerDate:30/06/1997 An Ordinance to empower the Commission to declare clearing houses to be recognized clearing houses for the purposes of this Ordinance, to provide for the approval by the Commission of the rules of recognized clearing houses, to make provision for safeguarding the operations and procedures of recognized clearing houses, and to provide for matters incidental thereto or connected therewith. (Enacted 1992) [7 October 1992] L.N. 324 of 1992 (Originally 68 of 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 1 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 PART I SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 1 Short title VerDate:30/06/1997 PART I PRELIMINARY (1) This Ordinance may be cited as the Securities and Futures (Clearing Houses) Ordinance. (Amended 62 of 1995 s. 2) (2) (Omitted as spent) (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 2 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 2 Interpretation VerDate:30/06/1997 (1) In this Ordinance, unless the context otherwise requires- "charge" (抵押) means any form of security, including a mortgage; "clearing house" (結算所) means- (a) a person- (i) whose activities or objects include the provision of services for the clearing and settlement of transactions in securities effected on, or subject to the rules of, the Unified Exchange; or (ii) who guarantees the settlement of any such transactions; or (b) a clearing house within the meaning of section 2(1) of the Commodities Trading Ordinance (Cap 250); (Replaced 62 of 1995 s. 3) "Commission" (監察委員會) means the Securities and Futures Commission established by section 3 of the Securities and Futures Commission Ordinance (Cap 24); "constitution" (章程), in relation to a clearing house, means the memorandum and articles of association of the clearing house; "default proceedings" (失責處理程序) means any proceedings or other action taken by a recognized clearing house under its default rules; "default rules" (失責處理規則), in relation to a recognized clearing house, means such of the rules of the clearing house which it is required to have by virtue of section 4(2); "defaulter" (失責人) means a participant who is the subject of any default proceedings; "functions" (職能) includes duties and powers; "futures contract" (期貨合約) means a futures contract within the meaning of section 2(1) of the Commodities Trading Ordinance (Cap 250); (Added 62 of 1995 s. 3) "Futures Exchange Company" (期貨交易所) means the Exchange Company within the meaning of section 2(1) of the Commodities Trading Ordinance (Cap 250); (Added 62 of 1995 s. 3) "market charge" (市場抵押) means a charge, whether fixed or floating, granted in favour of a recognized clearing house- (a) over any property specified in Schedule 1 which is held by or deposited with the clearing house; and (b) for the purpose of securing liabilities arising directly in connection with the clearing house's ensuring the settlement of one or more market contracts; "market collateral" (市場抵押品) means any property specified in Schedule 1 which is held by or deposited with a recognized clearing house for the purpose of securing liabilities arising directly in connection with the clearing house's ensuring the settlement of one or more market contracts; "market contract" (市場合約) means a contract subject to the rules of a recognized clearing house entered into by the clearing house with a participant pursuant to a novation which is both in accordance with those rules and for the purposes of the clearing and settlement of transactions in securities or futures contracts effected on, or subject to the rules of, the Unified Exchange or the Futures Exchange Company; (Amended 62 of 1995 s. 3) "officer" (高級人員) means an officer within the meaning of section 2 of the Companies Ordinance (Cap 32); "participant" (參與者) means a person who, in accordance with the rules of a recognized clearing house, may participate in one or more of the services provided by the clearing house in its capacity as a clearing house; "performance" (執行), in relation to a function, includes discharge and exercise; "recognized clearing house" (認可結算所) means a clearing house declared under section 3(1) to be a recognized clearing house for the purposes of this Ordinance; "relevant office-holder" (有關人員) means- (a) the Official Receiver appointed under section 75 of the Bankruptcy Ordinance (Cap 6); (b) any person acting in relation to a company as its liquidator, provisional liquidator, receiver or manager; (c) any person acting in relation to an individual as his trustee in bankruptcy or interim receiver of his property; or (d) any person appointed pursuant to an order for the administration in bankruptcy of an insolvent estate of a deceased person; "rules" (規則), in relation to a clearing house- (a) means the constitution, rules, regulations or directions, by whatever name called, governing the membership, management, operations and procedures of the clearing house; and (b) without restricting the generality of paragraph (a), includes rules, regulations or directions relating to- (i) the provision of clearing and settlement services, and the suspension or withdrawal of such services; (ii) the provision of services other than the services referred to in subparagraph (i); (iii) the persons who may participate in one or more of the services referred to in subparagraphs (i) and (ii); and (iv) setting and levying fees and charges; "securities" (證券) means securities within the meaning of section 2 of the Securities Ordinance (Cap 333); "settlement" (交收), in relation to a market contract, includes partial settlement; "Unified Exchange" (聯合交易所) means the Unified Exchange established under section 27 of the Stock Exchanges Unification Ordinance (Cap 361). (2) Where- (a) a charge is granted partly for the purpose specified in the definition of "market charge" and partly for other purposes, the charge is in this Ordinance a market charge in so far as it has effect for that specified purpose; (b) collateral is provided partly for the purpose specified in the definition of "market collateral" and partly for other purposes, the collateral is in this Ordinance market collateral in so far as it has been provided for that specified purpose. (3) References in this Ordinance to the law of insolvency include references to every provision made by or under - (a) the Bankruptcy Ordinance (Cap 6); (b) the Companies Ordinance (Cap 32); and (c) any other enactment which is concerned with or in any way related to the insolvency of a person. (4) References in this Ordinance to settlement in relation to a market contract are to the discharge of the rights and liabilities of the parties to the contract, whether by performance, compromise or otherwise. (Enacted 1992) "charge" (抵押) "clearing house" (結算所) "Commission" (監察委員會) "constitution" (章程) "default proceedings" (失責處理程序) "default rules" (失責處理規則) "defaulter" (失責人) "functions" (職能) "futures contract" (期貨合約) "Futures Exchange Company" (期貨交易所) "market charge" (市場抵押) "market collateral" (市場抵押品) "market contract" (市場合約) "officer" (高級人員) "participant" (參與者) "performance" (執行) "recognized clearing house" (認可結算所) "relevant office-holder" (有關人員) "rules" (規則) "securities" (證券) "settlement" (交收) "Unified Exchange" (聯合交易所) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 3 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 PART II SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 3 Recognized clearing houses VerDate:30/06/1997 PART II DECLARATION OF CLEARING HOUSES FOR PURPOSES OF THIS ORDINANCE AND RULES OF CLEARING HOUSES (1) Where the Commission is satisfied that it is appropriate to do so in the interest of the investing public or in the public interest, or for the proper regulation of services for the clearing and settlement of transactions in securities or futures contracts, it may, with the consent in writing of the Financial Secretary, by notice in the Gazette, declare a clearing house to be a recognized clearing house for the purposes of this Ordinance. (Amended 62 of 1995 s. 4) (2) Where the Commission makes a declaration under subsection (1) in respect of a clearing house- (a) it shall give notice thereof in writing to the clearing house; and (b) the rules of the clearing house in operation immediately before the declaration shall continue to have effect unless otherwise specified, or until such time as is specified, in the notice referred to in paragraph (a). (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 4 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 4 Rules of recognized clearing houses, etc. VerDate:06/03/2000 (1) Subject to section 3(2)(b) and subsection (4), no rules of a recognized clearing house (including any default rules of the clearing house) or any amendment thereto shall have effect unless approved in writing by the Commission. (2) A recognized clearing house shall have rules which provide for the taking of proceedings or other action in the event of a participant appearing to be unable, or likely to become unable, to meet his obligations in respect of all unsettled or open market contracts to which he is a party, and such rules shall comply with the requirements of Schedule 2. (Amended 62 of 1995 s. 5) (3) Where a recognized clearing house takes any default proceedings, all subsequent proceedings or other action taken under its rules for the purposes of the settlement of market contracts of which the defaulter concerned is a party shall be treated as done under the default rules of the clearing house notwithstanding that, but for this subsection, such subsequent proceedings or other action would not be treated as done under the default rules of the clearing house. (4) The Commission may, by notice in the Gazette, declare any class of rules of a recognized clearing house (except any default rules of the clearing house) to be a class of rules which are not required to be approved under subsection (1) and, accordingly, any rules of that clearing house which belong to that class (including any amendment thereto) shall have effect notwithstanding that they have not been so approved. (5) Without prejudice to the operation of subsection (4), a recognized clearing house shall submit or cause to be submitted to the Commission, for the information of the Commission, any of its rules (including any amendment thereto)- (a) which belong to a class of rules the subject of a declaration under subsection (4); and (b) as soon as practicable after those rules (or amendment thereto, as the case may be) are made. (6) A recognized clearing house shall submit or cause to be submitted to the Commission for its approval the rules of the clearing house and every amendment thereto except any rules (including any amendment thereto) which belong to a class of rules the subject of a declaration under subsection (4). (7) Subject to subsections (8) and (9), the Commission shall, within 6 weeks after the receipt of any submission under subsection (6) from a recognized clearing house, give notice in writing to the clearing house of- (a) its approval of; or (b) its refusal to approve, the rules or amendment of the rules, as the case may be, or any part thereof, the subject of the submission together with, where paragraph (b) is applicable, its reasons for the refusal. (Amended 12 of 2000 s. 23) (8) The Commission may, in a particular case, with the agreement of the recognized clearing house concerned, extend the time prescribed in subsection (7). (9) The Financial Secretary may, after consultation with the Commission and the recognized clearing house concerned, extend the time prescribed in subsection (7). (Amended 12 of 2000 s. 23) (10) The Commission may request in writing a recognized clearing house- (a) to make rules- (i) specified in the request; and (ii) within the period specified in the request; or (b) to amend rules- (i) referred to in the request; (ii) in the manner specified in the request; and (iii) within the period specified in the request. (11) Where the Commission is satisfied that a recognized clearing house has not complied with a request referred to in subsection (10) within the period specified in the request, the Commission may direct in writing the clearing house to comply with the request within such further period as is specified in the direction and, accordingly, the clearing house shall comply with that request within that further period. (12) For the purposes of subsection (10), "rules" (規則), in relation to a recognized clearing house, do not include the constitution of the clearing house. (Enacted 1992) "rules" (規則) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 4 Rules of recognized clearing houses, etc. VerDate:30/06/1997 (1) Subject to section 3(2)(b) and subsection (4), no rules of a recognized clearing house (including any default rules of the clearing house) or any amendment thereto shall have effect unless approved in writing by the Commission. (2) A recognized clearing house shall have rules which provide for the taking of proceedings or other action in the event of a participant appearing to be unable, or likely to become unable, to meet his obligations in respect of all unsettled or open market contracts to which he is a party, and such rules shall comply with the requirements of Schedule 2. (Amended 62 of 1995 s. 5) (3) Where a recognized clearing house takes any default proceedings, all subsequent proceedings or other action taken under its rules for the purposes of the settlement of market contracts of which the defaulter concerned is a party shall be treated as done under the default rules of the clearing house notwithstanding that, but for this subsection, such subsequent proceedings or other action would not be treated as done under the default rules of the clearing house. (4) The Commission may, by notice in the Gazette, declare any class of rules of a recognized clearing house (except any default rules of the clearing house) to be a class of rules which are not required to be approved under subsection (1) and, accordingly, any rules of that clearing house which belong to that class (including any amendment thereto) shall have effect notwithstanding that they have not been so approved. (5) Without prejudice to the operation of subsection (4), a recognized clearing house shall submit or cause to be submitted to the Commission, for the information of the Commission, any of its rules (including any amendment thereto)- (a) which belong to a class of rules the subject of a declaration under subsection (4); and (b) as soon as practicable after those rules (or amendment thereto, as the case may be) are made. (6) A recognized clearing house shall submit or cause to be submitted to the Commission for its approval the rules of the clearing house and every amendment thereto except any rules (including any amendment thereto) which belong to a class of rules the subject of a declaration under subsection (4). (7) Subject to subsections (8) and (9), the Commission shall, within 6 weeks after the receipt of any submission under subsection (6) from a recognized clearing house, give notice in writing to the clearing house of- (a) its approval of; or (b) its refusal to approve, the rules or amendment of the rules, as the case may be, or any part thereof, the subject of the submission. (8) The Commission may, in a particular case, with the agreement of the recognized clearing house concerned, extend the time prescribed in subsection (7). (9) The Financial Secretary may, on the advice of the Commission and either generally or in a particular case, extend the time prescribed in subsection (7). (10) The Commission may request in writing a recognized clearing house- (a) to make rules- (i) specified in the request; and (ii) within the period specified in the request; or (b) to amend rules- (i) referred to in the request; (ii) in the manner specified in the request; and (iii) within the period specified in the request. (11) Where the Commission is satisfied that a recognized clearing house has not complied with a request referred to in subsection (10) within the period specified in the request, the Commission may direct in writing the clearing house to comply with the request within such further period as is specified in the direction and, accordingly, the clearing house shall comply with that request within that further period. (12) For the purposes of subsection (10), "rules" (規則), in relation to a recognized clearing house, do not include the constitution of the clearing house. (Enacted 1992) "rules" (規則) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 5 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 PART III SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 5 Proceedings of recognized clearing house take precedence over law of insolvency VerDate:30/06/1997 PART III MODIFICATIONS OF THE LAW OF INSOLVENCY TO SAFEGUARD OPERATIONS AND PROCEDURES OF RECOGNIZED CLEARING HOUSES, ETC. (1) None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on insolvency, bankruptcy or winding-up, or on the appointment of a receiver over any of the assets of a person- (a) a market contract; (b) the rules of a recognized clearing house relating to the settlement of a market contract; (c) any proceedings or other action taken under the rules of a recognized clearing house relating to the settlement of a market contract; (d) a market charge; (e) the default rules of a recognized clearing house; or (f) any default proceedings. (2) Subject to subsection (3), the powers of a relevant office-holder in his capacity as such, and the powers of a court under the law of insolvency, shall not be exercised in such a way as to prevent or interfere with- (a) the settlement in accordance with the rules of a recognized clearing house of a market contract; or (b) any default proceedings. (3) Subsection (2) shall not operate to prevent a relevant office-holder from seeking to recover any amount under section 11 after the completion of a matter referred to in paragraph (a) or (b) of that subsection. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 6 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 6 Supplementary provisions as to default proceedings VerDate:01/04/1998 (1) A court may on an application by a relevant office-holder make such order as it thinks fit altering or releasing him from compliance with such of the functions of his office as are affected by the fact that default proceedings are pending or could be taken, or have been or could have been taken and, accordingly, such functions of the relevant office-holder shall be construed subject to such order. (2) Nothing in- (a) section 12, 14 or 20A to 20K of the Bankruptcy Ordinance (Cap 6); or (Amended 76 of 1996 s. 92) (b) section 166, 181, 183, 186 or 254 of the Companies Ordinance (Cap 32), shall prevent or interfere with any default proceedings. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 6 Supplementary provisions as to default proceedings VerDate:30/06/1997 (1) A court may on an application by a relevant office-holder make such order as it thinks fit altering or releasing him from compliance with such of the functions of his office as are affected by the fact that default proceedings are pending or could be taken, or have been or could have been taken and, accordingly, such functions of the relevant office-holder shall be construed subject to such order. (2) Nothing in - (a) section 12, 14 or 20 of the Bankruptcy Ordinance (Cap. 6); or (b) section 166, 181, 183, 186 or 254 of the Companies Ordinance (Cap. 32), shall prevent or interfere with any default proceedings. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 7 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 7 Duty to report on completion of default proceedings VerDate:30/06/1997 (1) A recognized clearing house shall, upon the completion by it of any default proceedings, make a report on such proceedings stating in respect of each defaulter- (a) the net sum, if any, certified by the clearing house to be payable by or to the defaulter; or (b) the fact that no sum is so payable, as the case may be, and the clearing house may include in that report such other particulars in respect of such proceedings as it thinks fit. (2) A recognized clearing house which has made a report pursuant to subsection (1) shall supply the report to- (a) the Commission; (b) any relevant office-holder acting in relation to - (i) the defaulter to whom the report relates; or (ii) that defaulter's estate; (c) if there is no relevant office-holder referred to in paragraph (b), the defaulter to whom the report relates. (3) Where the Commission receives pursuant to subsection (2) a report made pursuant to subsection (1), it may publish notice of that fact in such manner as it thinks appropriate to bring it to the attention of creditors of the defaulter to whom the report relates. (4) Where a relevant office-holder or defaulter receives pursuant to subsection (2) a report made pursuant to subsection (1), he shall, at the request of a creditor of the defaulter to whom the report relates- (a) make the report available for inspection by the creditor; (b) on payment of such reasonable fee as the relevant office-holder or defaulter, as the case may be, determines, supply to the creditor all or any part of that report. (5) In subsections (2), (3) and (4), "report" (報告) includes a copy of a report. (Enacted 1992) "report" (報告) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 8 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 8 Net sum payable on completion of default proceedings VerDate:01/04/1998 (1) The provisions of this section shall apply with respect to any net sum certified under section 7(1)(a) by a recognized clearing house, upon the completion by it of any default proceedings, to be payable by or to a defaulter. (2) Where a bankruptcy or winding-up order has been made, or a resolution for voluntary winding-up has been passed, any net sum shall, notwithstanding any of the provisions of section 34 or 35 of the Bankruptcy Ordinance (Cap 6) or section 264 of the Companies Ordinance (Cap 32), be- (Amended 76 of 1996 s. 93) (a) provable in the bankruptcy or winding-up or, as the case may be, payable to the relevant office-holder; and (b) taken into account, where appropriate, under section 35 of the Bankruptcy Ordinance (Cap 6) or that section as applied in the case of a winding-up order under the Companies Ordinance (Cap 32). (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 8 Net sum payable on completion of default proceedings VerDate:30/06/1997 (1) The provisions of this section shall apply with respect to any net sum certified under section 7(1)(a) by a recognized clearing house, upon the completion by it of any default proceedings, to be payable by or to a defaulter. (2) Where a receiving or winding-up order has been made, or a resolution for voluntary winding-up has been passed, any net sum shall, notwithstanding any of the provisions of section 34 or 35 of the Bankruptcy Ordinance (Cap. 6) or section 264 of the Companies Ordinance (Cap. 32), be - (a) provable in the bankruptcy or winding-up or, as the case may be, payable to the relevant office-holder; and (b) taken into account, where appropriate, under section 35 of the Bankruptcy Ordinance (Cap. 6) or that section as applied in the case of a winding-up order under the Companies Ordinance (Cap. 32). (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 9 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 9 Disclaimer of property, rescission of contracts, etc. VerDate:30/06/1997 (1) Neither section 59 of the Bankruptcy Ordinance (Cap 6) nor section 268 of the Companies Ordinance (Cap 32) shall apply in relation to- (a) a market contract; (b) a contract effected by a recognized clearing house for the purpose of realizing property provided as market collateral; (c) a market charge; or (d) any default proceedings. (2) Neither section 42 of the Bankruptcy Ordinance (Cap 6) nor section 182 of the Companies Ordinance (Cap 32) shall apply in relation to any act, matter or thing which has been done pursuant to- (a) a market contract; (b) a disposition of property pursuant to a market contract; (c) the provision of market collateral; (d) a contract effected by a recognized clearing house for the purpose of realizing property provided as market collateral, or any disposition of property pursuant to such a contract; (e) a disposition of property in accordance with the rules of a recognized clearing house as to the application of property provided as market collateral; (f) a disposition of property as a result of which the property becomes subject to a market charge, or any transaction pursuant to which that disposition is made; (g) a disposition of property made in enforcing a market charge; (h) a market charge; or (i) any default proceedings. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 10 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 10 Adjustment of prior transactions VerDate:01/04/1998 (1) No order shall be made pursuant to- (a) section 49 or 50 of the Bankruptcy Ordinance (Cap 6); (Amended 76 of 1996 s. 94) (b) section 266 of the Companies Ordinance (Cap 32); or (c) section 60 of the Conveyancing and Property Ordinance (Cap 219), in relation to any matter to which this section applies. (2) The matters to which this section applies are- (a) a market contract; (b) a disposition of property pursuant to a market contract; (c) the provision of market collateral; (d) a contract effected by a recognized clearing house for the purpose of realizing property provided as market collateral; (e) a disposition of property in accordance with the rules of a recognized clearing house as to the application of property provided as market collateral; (f) a market charge; and (g) any default proceedings. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 10 Adjustment of prior transactions VerDate:30/06/1997 (1) No order shall be made pursuant to - (a) section 47, 48 or 49 of the Bankruptcy Ordinance (Cap. 6); (b) section 266 of the Companies Ordinance (Cap. 32); or (c) section 60 of the Conveyancing and Property Ordinance (Cap. 219), in relation to any matter to which this section applies. (2) The matters to which this section applies are - (a) a market contract; (b) a disposition of property pursuant to a market contract; (c) the provision of market collateral; (d) a contract effected by a recognized clearing house for the purpose of realizing property provided as market collateral; (e) a disposition of property in accordance with the rules of a recognized clearing house as to the application of property provided as market collateral; (f) a market charge; and (g) any default proceedings. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 11 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 11 Right of relevant office-holder to recover certain amounts arising from certain transactions VerDate:20/11/1998 (1) Where a participant ("the first participant") enters into a transaction for the sale or purchase of securities with another participant ("the second participant")- (a) when- (i) a prescribed event has occurred in relation to- (A) the second participant; or (B) the person who is, in respect of the transaction, the principal of the second participant, and the transaction is at an undervalue or an over-value; or (ii) the first participant, or the person who is, in respect of the transaction, the principal of the first participant, knew, or ought reasonably to have known- (A) in the case of the first participant, that a prescribed event was likely to occur in relation to- (I) the second participant; or (II) the person who is, in respect of the transaction, the principal of the second participant; (B) in the case of that person, that a prescribed event was likely to occur in relation to the person referred to in sub-subparagraph (A)(II), and the transaction is at an undervalue or an over-value and any such event occurs within the period of 6 months immediately following the date on which the transaction was so entered into; and (b) thereafter a relevant office-holder is acting in relation to- (i) the second participant; (ii) the person who was, in respect of the transaction, the principal of the second participant; or (iii) the estate of the second participant or of the person referred to in subparagraph (ii), then, unless a court otherwise orders, the relevant office-holder may recover, from the first participant, or the person who was, in respect of the transaction, the principal of the first participant, an amount equal to the prescribed gain obtained under the transaction by the first participant, or the person who was, in respect of the transaction, the principal of the first participant, as the case may be, and such amount is so recoverable notwithstanding that the transaction may have been discharged in accordance with the rules of a recognized clearing house and replaced by a market contract. (2) In this section- "prescribed event" (訂明事件), in relation to a second participant or a person who is or was, in respect of a transaction referred to in subsection (1), the principal of the second participant, means- (a) grounds exist for a creditor to present a bankruptcy petition against the second participant or that person, as the case may be; (Amended 37 of 1998 s. 9) (b) the making of a statutory declaration in respect of the second participant or that person, as the case may be, pursuant to section 228A(1) of the Companies Ordinance (Cap 32); (c) a meeting of creditors summoned in relation to the second participant or that person, as the case may be, pursuant to section 241 of the Companies Ordinance (Cap 32); or (d) the presentation of a petition for the winding-up of the second participant or that person, as the case may be, by a court; "prescribed gain" (訂明收益), in relation to a transaction referred to in subsection (1), means the difference between- (a) the market value of the securities the subject of the transaction; and (b) the value of the consideration for the transaction, as at the time the transaction was entered into. (Enacted 1992) "prescribed event" (訂明事件) "prescribed gain" (訂明收益) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 11 Right of relevant office-holder to recover certain amounts arising from certain transactions VerDate:30/06/1997 (1) Where a participant ("the first participant") enters into a transaction for the sale or purchase of securities with another participant ("the second participant")- (a) when- (i) a prescribed event has occurred in relation to- (A) the second participant; or (B) the person who is, in respect of the transaction, the principal of the second participant, and the transaction is at an undervalue or an over-value; or (ii) the first participant, or the person who is, in respect of the transaction, the principal of the first participant, knew, or ought reasonably to have known - (A) in the case of the first participant, that a prescribed event was likely to occur in relation to - (I) the second participant; or (II) the person who is, in respect of the transaction, the principal of the second participant; (B) in the case of that person, that a prescribed event was likely to occur in relation to the person referred to in sub-subparagraph (A)(II), and the transaction is at an undervalue or an over-value and any such event occurs within the period of 6 months immediately following the date on which the transaction was so entered into; and (b) thereafter a relevant office-holder is acting in relation to - (i) the second participant; (ii) the person who was, in respect of the transaction, the principal of the second participant; or (iii) the estate of the second participant or of the person referred to in subparagraph (ii), then, unless a court otherwise orders, the relevant office-holder may recover, from the first participant, or the person who was, in respect of the transaction, the principal of the first participant, an amount equal to the prescribed gain obtained under the transaction by the first participant, or the person who was, in respect of the transaction, the principal of the first participant, as the case may be, and such amount is so recoverable notwithstanding that the transaction may have been discharged in accordance with the rules of a recognized clearing house and replaced by a market contract. (2) In this section- "prescribed event" (訂明事件), in relation to a second participant or a person who is or was, in respect of a transaction referred to in subsection (1), the principal of the second participant, means- (a) an act of bankruptcy committed by the second participant or that person, as the case may be; (b) the making of a statutory declaration in respect of the second participant or that person, as the case may be, pursuant to section 228A(1) of the Companies Ordinance (Cap 32); (c) a meeting of creditors summoned in relation to the second participant or that person, as the case may be, pursuant to section 241 of the Companies Ordinance (Cap 32); or (d) the presentation of a petition for the winding-up of the second participant or that person, as the case may be, by a court; "prescribed gain" (訂明收益), in relation to a transaction referred to in subsection (1), means the difference between- (a) the market value of the securities the subject of the transaction; and (b) the value of the consideration for the transaction, as at the time the transaction was entered into. (Enacted 1992) "prescribed event" (訂明事件) "prescribed gain" (訂明收益) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 12 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 12 Application of market collateral not affected by certain other interests, etc. VerDate:30/06/1997 (1) The provisions of this section shall have effect with respect to the application by a recognized clearing house of property provided as market collateral. (2) So far as necessary to enable the property to be applied in accordance with the rules of a recognized clearing house, it may be so applied notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the clearing house had notice of the interest, right or breach of duty, as the case may be, at the time the property was provided as market collateral. (3) No right or remedy arising subsequently to the property being provided as market collateral may be enforced so as to prevent or interfere with the application of the property by the recognized clearing house in accordance with its rules. (4) Where a recognized clearing house has power by virtue of the provisions of this section to apply property notwithstanding an interest, right or remedy, a person to whom the clearing house disposes of the property in accordance with its rules takes free from that interest, right or remedy. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 13 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 13 Enforcement of judgments over property subject to market charge, etc. VerDate:30/06/1997 (1) Where property is subject to a market charge or has been provided as market collateral , no execution or other legal process for the enforcement of a judgment or order may be commenced or continued, and no distress may be levied, against the property by a person not seeking to enforce any interest in or security over the property, except with the consent of the recognized clearing house concerned. (2) Where by virtue of this section a person would not be entitled to enforce a judgment or order against any property, any injunction or other remedy granted with a view to facilitating the enforcement of any such judgment or order shall not extend to that property. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 14 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 14 Law of insolvency in other jurisdictions VerDate:30/06/1997 "law of insolvency" (破產清盤法) (1) A court shall not, pursuant to any enactment or rule of law, recognize or give effect to- (a) any order of a court exercising jurisdiction in relation to the law of insolvency in a place outside Hong Kong; or (b) any act of a person appointed in such a place to perform any functions under the law of insolvency in such place, in so far as the making of the order or the doing of the act would be prohibited in the case of a court in Hong Kong or a relevant office-holder by provisions made by or under this Ordinance. (2) In this section, "law of insolvency" (破產清盤法), in relation to a place outside Hong Kong, means any law of such place which is similar to, or serves the same purposes as, all or any part of the law of insolvency in Hong Kong. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 15 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 PART IV SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 15 Participant to be party to certain transactions as principal VerDate:30/06/1997 PART IV MISCELLANEOUS (1) Where- (a) a participant in his capacity as such enters into any transaction (including a market contract) with a recognized clearing house; and (b) but for this subsection, the participant would be a party to that transaction as agent, then, notwithstanding any other enactment or rule of law, as between, but only as between, the clearing house and any other person (including the participant and the person who is his principal in respect of that transaction), the participant shall for all purposes (including any action, claim or demand, either civil or criminal)- (i) be deemed not to be a party to that transaction as agent; and (ii) be deemed to be a party to that transaction as principal. (2) Where- (a) 2 or more participants in their capacities as such enter into any transaction; and (b) but for this subsection, any such participant would be a party to that transaction as agent, then, notwithstanding any other enactment or rule of law, any such participant to whom paragraph (b) applies shall for all purposes (including any action, claim or demand, either civil or criminal), except as between, but only as between, him and the person who is his principal in respect of the transaction- (i) be deemed not to be a party to that transaction as agent; and (ii) be deemed to be a party to that transaction as principal. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 15A (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 15A Provision of false information VerDate:17/07/2000 (1) A person commits an offence if he, in purported compliance with a requirement to provide information imposed by or under this Ordinance or any other enactment, provides to a recognized clearing house any information that is false or misleading in a material particular and he- (a) knows it to be false or misleading in a material particular; or (b) is reckless as to whether it is false or misleading in a material particular. (2) Subsection (1) shall not apply if, in relation to a provision of this Ordinance or any other enactment by or under which a requirement to provide any information is imposed, there is a provision in this Ordinance or in that enactment (as the case may be) making it an offence for a person to provide any false or misleading information in purported compliance with the requirement or a provision to similar effect. (3) Subject to subsection (4), a person commits an offence if he, in circumstances other than those mentioned in subsection (1), provides to a recognized clearing house a record or other document that is false or misleading in a material particular and- (a) either- (i) he knows it to be false or misleading in a material particular; or (ii) he is reckless as to whether it is false or misleading in a material particular; and (b) the record or other document is provided in connection with the performance of a function of the recognized clearing house under this Ordinance or any other enactment; and (c) he has, in relation to the provision of the record or other document, received prior written warning from the recognized clearing house to the effect that provision of false or misleading information shall render him liable for prosecution for an offence under this subsection. (4) In the prosecution of an offence under subsection (3), the prosecution shall, in addition to any other matters it is required to prove to obtain a conviction for that offence, also be required to prove for such conviction that- (a) the recognized clearing house has reasonably relied on the record or other document to which the offence relates (but it shall not be necessary to prove that any person has been misled or has suffered any detriment or incurred any loss as a result of the reliance); or (b) the defendant intended that the recognized clearing house rely on the record or other document. (5) In this section, "record or other document" (紀錄或其他文件) has the same meaning as in section 2(1) of the Securities and Futures Commission Ordinance (Cap 24). (6) (a) Any person who commits an offence under subsection (1) is liable- (i) on conviction upon indictment to a fine of $1000000 and to imprisonment for 2 years; (ii) on summary conviction to a fine at level 6 and to imprisonment for 1 year. (b) Any person who commits an offence under subsection (3) is liable- (i) on conviction upon indictment to a fine of $500000 and to imprisonment for 6 months; (ii) on summary conviction to a fine at level 5 and to imprisonment for 6 months. (Added 58 of 2000 s. 8) "record or other document" (紀錄或其他文件) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 16 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 16 Securities deposited with recognized clearing house VerDate:30/06/1997 (1) Subject to subsections (2) and (3), where securities are deposited- (a) with a recognized clearing house; (b) by a participant; and (c) in accordance with the rules of the clearing house, then, notwithstanding any other enactment or rule of law, no action, claim or demand, either civil or criminal, in respect of any right, title or interest in those securities held or enjoyed by any person lies, or shall be commenced or allowed, against the clearing house. (2) The operation of subsection (1) in respect of securities deposited with a recognized clearing house shall be subject to such modifications and exclusions as are provided in the rules of the clearing house. (3) This section shall not operate to prejudice the operation of section 100 of the Companies Ordinance (Cap 32). (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 17 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 17 Immunity, etc. VerDate:30/06/1997 (1) Neither a recognized clearing house, nor any officer or servant or member of the governing body of a recognized clearing house, shall be liable in damages for anything done or omitted to be done in the performance or purported performance of any functions to which this subsection applies if the act or omission is shown to have been done or omitted to be done, as the case may be, with reasonable care and in good faith. (2) The functions to which subsection (1) applies are the functions of a recognized clearing house so far as relating to, or to matters arising out of- (a) the default rules of the clearing house; or (b) any obligations to which it is subject by virtue of this Ordinance. (3) Neither a person performing, by virtue of any delegation in accordance with the default rules of a recognized clearing house, any functions of the clearing house in connection with any default proceedings, nor any officer or servant or member of the governing body of such a person, shall be liable in damages for anything done or omitted to be done in the performance or purported performance of those functions if the act or omission is shown to have been done or omitted to be done, as the case may be, with reasonable care and in good faith. (4) Any failure by a recognized clearing house to comply with its rules in respect of any matter shall not prevent that matter being treated for the purposes of this Ordinance as done in accordance with those rules so long as the failure does not substantially affect the rights of any person entitled to require compliance with those rules. (5) Where a relevant office-holder takes any action in relation to property of a defaulter which is liable to be dealt with in accordance with the default rules of a recognized clearing house, and believes and has reasonable grounds for believing that he is entitled to take that action, he is not liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage, as the case may be, is caused by the office-holder's own negligence. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 18 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 18 Preservation of rights, etc. VerDate:30/06/1997 For the avoidance of doubt, it is hereby declared that, except as is expressly provided by or under this Ordinance, the provisions of this Ordinance shall not operate to limit, restrict or otherwise affect- (a) any right, title, interest, privilege, obligation or liability of any person; (b) any investigation, legal proceeding or remedy in respect of any such right, title, interest, privilege, obligation or liability. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 19 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 19 Amendment of Schedules 1 and 2 VerDate:30/06/1997 (1) The Financial Secretary may, by notice in the Gazette, amend Schedule 1 or 2. (2) For the avoidance of doubt, it is hereby declared that the power of the Financial Secretary under subsection (1) to amend Schedule 2 may be exercised in such a way as to include in that Schedule a provision which requires a recognized clearing house to have, as part of its default rules, rules which prohibit the clearing house from taking any proceedings or other action specified in the provision, either generally or in a particular case. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 20 (Omitted as spent) VerDate:30/06/1997 (Omitted as spent) (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 21 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SECT 21 Transitional VerDate:30/06/1997 (1) In this section, unless the context otherwise requires- "former clearing house" (前結算所) means a person who was, immediately before the relevant day, a clearing house within the meaning of section 2 of the Stock Exchanges Unification Ordinance (Cap 361); "former rules" (前規則), in relation to a former clearing house, means those rules, within the meaning of section 2 of the Stock Exchanges Unification Ordinance (Cap 361), which, at any time before the relevant day, had effect by virtue of section 35A(3) or 35B(1) of that Ordinance; "relevant day" (有關日期) means the day of commencement of this Ordinance. (2) A former clearing house shall be deemed to be a recognized clearing house as if, on the relevant day, it had been declared under section 3(1) to be a recognized clearing house for the purposes of this Ordinance, and the provisions of this Ordinance shall, subject to subsection (3), apply accordingly. (3) Subject to subsection (4), no provision of the former rules of a former clearing house shall have effect on or after the relevant day unless and until it is approved under section 4(1). (4) Where any act, matter or thing has been done- (a) at any time before the relevant day and the former rules of a former clearing house applied to that act, matter or thing; or (b) under the former rules of a former clearing house at any time before the relevant day, then on and from the relevant day the former rules, as in force immediately before the relevant day, shall apply to and have effect in relation to that act, matter or thing- (i) to the extent that, but for the enactment of this Ordinance, that act, matter or thing would on or after the relevant day have had any force or effect or been in operation; and (ii) as if this Ordinance had never been enacted. (5) In relation to any entitlement to claim compensation arising under section 109(1) of the Securities Ordinance (Cap 333) occurring before the relevant day, the amendment made to section 109(3) of that Ordinance by item 7(e)(ii) of Schedule 3 shall not apply, and section 109(3) shall apply in relation to any such entitlement as if item 7(e)(ii) had never been enacted. (Enacted 1992) "former clearing house" (前結算所) "former rules" (前規則) "relevant day" (有關日期) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SCHEDULE 1 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SCHEDULE 1 PROPERTY WHICH MAY BE SUBJECT TO A MARKET CHARGE OR PROVIDED AS MARKET COLLATERAL VerDate:30/06/1997 [sections 2(1) & 19(1)] 1. Money, letters of credit, bankers' drafts, certified cheques, and any similar instruments. 2. Securities, including securities which are not securities within the meaning of section 2 of the Securities Ordinance (Cap 333). 3. Futures contracts, options and any similar financial contracts. (Added 62 of 1995 s. 6) (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SCHEDULE 2 (Repealed 5 of 2002 s. 406) VerDate:01/04/2003 SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SCHEDULE 2 REQUIREMENTS FOR DEFAULT RULES OF RECOGNIZED CLEARING HOUSES VerDate:30/06/1997 [sections 4(2) & 19] The rules of a recognized clearing house which provide for the taking of proceedings or other action in the event of a participant appearing to be unable, or likely to become unable, to meet his obligations in respect of all unsettled or open market contracts to which he is a party shall- (Amended 62 of 1995 s. 7) (a) enable the settlement of all such contracts; (b) for the purpose of paragraph (a), provide for there to be payable by or to the participant a sum of money in relation to each such contract if that is required after taking into account all the rights and liabilities of the participant under or in respect of the contract concerned; (c) enable all sums of money payable by or to the participant as determined in accordance with paragraph (b) to be aggregated or set-off so as to produce a net sum, if any, payable by or to the participant; (d) if any net sum referred to in paragraph (c) is payable by the participant, provide for that net sum to be set-off against all property of the participant which is either subject to a market charge or which has been provided as market collateral (or set-off against the proceeds of the realization of such property) so as to produce a further net sum, if any, payable by or to the participant; (e) if any net sum referred to in paragraph (c) is payable to the participant, provide that all property of the participant which is either subject to a market charge or which has been provided as market collateral shall cease to be subject to the market charge (but without prejudice to any other form of charge to which it may be subject) or to be market collateral (but without prejudice to its provision as any other form of collateral), as the case may be; and (f) provide for the certification by the clearing house of any net sum referred to in paragraph (c) payable to the participant, or of any further net sum referred to in paragraph (d) payable by or to the participant, as the case may be, or, if there is no such sum, the certification by the clearing house of that fact. (Enacted 1992) SECURITIES AND FUTURES (CLEARING HOUSES) ORDINANCE - SCHEDULE 3 (Omitted as spent) VerDate:30/06/1997 (Omitted as spent)