Hong Kong Ordinances

SECURITIES AND FUTURES ORDINANCE - SECT 61

Person not to become minority controller of exchange controller, etc. without approval of Commission

(1) Subject to subsections (2) and (16), on or after the commencement of this
section, a person shall not-

   (a)  be or become a minority controller of a recognized exchange
        controller, recognized exchange company or recognized clearing house
        except with the approval in writing of the Commission after
        consultation with the Financial Secretary; and

   (b)  if such approval is given, and subject to any condition specified in
        the approval disapplying this paragraph in whole or in part, increase
        the interest the person has as such minority controller except with
        the further approval in writing of the Commission after consultation
        with the Financial Secretary.

(2) The Commission shall not give an approval under subsection

(1)(a) or (b) unless it is satisfied that it is appropriate to do so in the
interest of the investing public or in the public interest.

(3) Where the Commission refuses to give an approval under subsection (1)(a)
or (b), it shall give notice in writing of its reasons for the refusal to the
person concerned.

(4) Subject to subsection (5), a person who contravenes subsection

(1) commits an offence and is liable-

   (a)  on conviction on indictment to a fine of $1000000 and to imprisonment
        for 2 years; or

   (b)  on summary conviction to a fine at level 6 and to imprisonment for 6
        months.

(5) Where a person is charged with an offence under subsection (4), it is a
defence to the charge for the person to prove that the person-

   (a)  did not know that the acts or circumstances by virtue of which the
        person became a minority controller, or increased the interest the
        person has as a minority controller (as the case may be) of the
        recognized exchange controller, recognized exchange company or
        recognized clearing house concerned were such as to have that effect;
        or

   (b)  exercised reasonable diligence to avoid contravening subsection

(1).

(6) Where a person-

   (a)  is a minority controller of a recognized exchange controller,
        recognized exchange company or recognized clearing house in
        contravention of subsection (1) (and whether or not the person is
        charged with an offence under subsection (4) in relation to the
        contravention);

   (b)  did not know and had no reason to suspect the existence of any of the
        acts or circumstances by virtue of which the person became the
        minority controller of that recognized exchange controller, recognized
        exchange company or recognized clearing house; and

   (c)  subsequently becomes aware of the fact that the person has become such
        a minority controller, the person shall serve on the Commission, not
        later than 14 days after becoming aware of that fact, a notice in
        writing stating that the person has become such a minority controller.

(7) The Commission may, upon the service of a notice under subsection (6)-

   (a)  approve the person as a minority controller in accordance with
        subsection (1); or

   (b)  refuse to approve the person as a minority controller.

(8) Where a person is a minority controller of a recognized exchange
controller, recognized exchange company or recognized clearing house in
contravention of subsection (1) (and whether or not the person is charged with
an offence under subsection (4) in relation to the contravention), the
Commission may, by notice published in the Gazette-

   (a)  declare that any votes cast at any meeting of the recognized exchange
        controller, recognized exchange company or recognized clearing house
        (as the case may be) by the person after the person became the
        minority controller, shall be void and of no effect; and

   (b)  give such directions as it considers appropriate for any such meetings
        to be reconvened for voting anew on the business on which such votes
        were cast.

(9) Where a person is a minority controller of a recognized exchange
controller, recognized exchange company or recognized clearing house in
contravention of subsection (1) or has failed to comply with a condition
specified in an approval under that subsection (and whether or not the person
is charged with an offence under subsection (4) in relation to the
contravention)-

   (a)  the person or any of his associated persons shall not exercise any
        rights conferred on the person as a holder of securities in the
        recognized exchange controller, recognized exchange company or
        recognized clearing house concerned or any rights in securities in any
        such company which are otherwise controlled by the person, except for
        the purpose of ceasing to be such controller; and

   (b)  the Commission may, by notice in writing served on the person, direct
        the person to take such steps as are specified in the notice-

        (i)    for the purpose of causing the person to cease to be a
               minority  controller of the recognized exchange controller,
               recognized exchange company or recognized clearing house the
               subject of that contravention or failure; and

        (ii)   within such period as is specified in the notice for the
               purpose.

(10) Without limiting the generality of steps referred to in subsection (9)(b)
which may be specified in a notice under that subsection to be served on a
person referred to in that subsection, such steps may consist in whole or in
part of steps proposed in writing to the Commission by that person.

(11) The steps specified in a notice under subsection (9)(b) may be framed so
as to afford the person on whom the notice is served a choice between
different ways of ceasing to be a minority controller of the recognized
exchange controller, recognized exchange company or recognized clearing house
concerned.

(12) A notice served under subsection (9)(b) shall not take effect-

   (a)  subject to paragraph (b), until the expiration of the period within
        which an appeal against the notice may be made under section 73; or

   (b)  if an appeal against the notice is made under section 73, until the
        appeal is withdrawn, abandoned or determined.

(13) Subject to subsection (14), a person served with a notice under
subsection (9)(b) who fails to comply with the notice commits an offence and
is liable-

   (a)  on conviction on indictment to a fine of $1000000 and to imprisonment
        for 2 years; or

   (b)  on summary conviction to a fine at level 6 and to imprisonment for 6
        months.

(14) It is a defence for a person charged with an offence under subsection
(13) to prove that the person exercised reasonable diligence to comply with
the notice concerned under subsection (9)(b) served on the person.

(15) Where a person served with a notice under subsection (9)(b) fails to
comply with the notice (and whether or not the person is charged with an
offence under subsection (13) in relation to the failure), the provisions of
Part 6 of Schedule 3 shall immediately apply.

(16) The Commission may, after consultation with the Financial Secretary, make
rules to exempt a person, or a person belonging to a class of persons,
specified in the rules from one or more of the requirements of subsection (1)
subject to such conditions (if any) as are specified in the rules.

(17) Where a person is seeking to be a minority controller of a recognized
exchange controller, recognized exchange company or recognized clearing house
and the Commission is minded not to give approval under subsection (1) in
relation thereto, the Commission shall give the person a reasonable
opportunity of being heard before making a decision not to give such approval.

(18) Nothing in this section shall operate to prevent the Commission from
approving under this or any other Ordinance the provisions of the
constitution, or the provisions of an amendment to the constitution, of a
recognized exchange controller, recognized exchange company or recognized
clearing house which impose requirements additional to this section in
relation to-

   (a)  interests held in the recognized exchange controller, recognized
        exchange company or recognized clearing house (as the case may be)
        including, but not limited to, the exercise, or the control of the
        exercise, of voting power at any general meeting of the recognized
        exchange controller, recognized exchange company or recognized
        clearing house (as the case may be); or

   (b)  steps to be taken for the purpose of causing a person to dispose of
        any such interest including, but not limited to, ceasing to be a
        minority controller (by whatever name called) of the recognized
        exchange controller, recognized exchange company or recognized
        clearing house (as the case may be).

(19) A notice under subsection (8) is not subsidiary legislation.

(20) In this section, "minority controller" (次要控制人), in relation to
a recognized exchange controller, recognized exchange company or recognized
clearing house-

   (a)  subject to paragraph (b), means any person who, either alone or with
        any associated person or persons, is entitled to exercise, or control
        the exercise of, 5% or more of the voting power at any general meeting
        of the recognized exchange controller, recognized exchange company or
        recognized clearing house (as the case may be) or of a corporation of
        which the recognized exchange controller, recognized exchange company
        or recognized clearing house (as the case may be) is a subsidiary;

   (b)  does not include-

        (i)    a recognized exchange controller; or

        (ii)   a person, or a person belonging to a class of persons,
               specified in Part 7 of Schedule 3 not to be a
               minority controller for the purposes of this Division.

"minority controller" (次要控制人)