FINANCIAL RESOURCES RULES - CHAPTER 24D FINANCIAL RESOURCES RULES - LONG TITLE Empowering section (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - LONG TITLE Empowering section VerDate:30/06/1997 (Cap 24, section 28) [1 December 1993] (L.N. 250 of 1993) FINANCIAL RESOURCES RULES - SECT 1 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 1 (Omitted as spent) VerDate:30/06/1997 PART I PRELIMINARY (Omitted as spent) (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 2 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 2 Interpretation VerDate:06/03/2000 In these Rules, unless the context otherwise requires- "adjusted current assets" (經調整流動資產) means such assets as are prescribed as adjusted current assets by section 15; "adjusted liabilities" (經調整負債) means such liabilities and financial adjustments as are prescribed as adjusted liabilities by section 16; "adjusted net admissible assets" (經調整可接納資產淨值) means net admissible assets less margin required to be deposited by a futures dealer with a clearing house or any of its clearing participants, or with any person in respect of trading in futures contracts or options by the futures dealer on his own account; (12 of 2000 s. 23) "approved redeemable shares" (核准可贖回股份) means shares in the share capital of a corporation, which are approved by the Commission for the purposes of these Rules, and are redeemable at the option of the holder of the shares or that of the corporation; "approved subordinated loan" (核准附屬貸款) means a loan, which is approved by the Commission for the purposes of these Rules, and under which the lender's claim is subordinated to the prior payment, or provision for payment, in full of all claims of all other present and future creditors of the borrower; "corporation" (法團) has the meaning assigned to it by section 2(1) of the Securities Ordinance (Cap 333); "foreign currency" (外幣) means, in relation to a registered person, any currency other than- (a) the currency used, or intended to be used, by that person in his annual accounts lodged with the Commission; and (b) any currency which has an exchange rate which is linked to the currency referred to in paragraph (a); "foreign exchange agreement" (外匯議) means an agreement whereby 2 parties agree to exchange different currencies at a future time; "futures dealer" (期貨交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250); "futures trading adviser" (期貨交易顧問) means a commodity trading adviser registered under the Commodities Trading Ordinance (Cap 250); "liquid assets" (速動資產) means such assets as are prescribed as liquid assets by section 9; "liquid capital" (速動資金) means the excess of liquid assets over ranking liabilities; "net tangible assets" (有形資產淨值) means, in relation to a registered person, total tangible assets beneficially owned by him less the aggregate of- (a) fixed assets beneficially owned by him; (b) his total liabilities, other than- (i) any liability that is not required to be settled within 12 months and is incurred for the purpose of financing the purchase or the holding of property and equipment used in the business for which he is registered, to the extent of the net realizable value of such property and equipment; and (ii) any approved subordinated loan; and (c) where the registered person is a corporation, the consideration at which redeemable shares have been issued by it but not redeemed, other than any approved redeemable shares; "OECD countries" (經濟合作及發展組織國家) means countries belonging to the Organisation for Economic Co-operation and Development; "qualifying debt securities" (合資格債務證券) means debenture stock, loan stock, debentures, bonds, notes and other securities or instruments acknowledging, evidencing or creating indebtedness- (a) which are listed on the Unified Exchange; (b) which are issued or guaranteed by the Government of Hong Kong, or by any government or central bank of an OECD country or of Singapore; or (c) the issuer of which has a Moody's Investors Service rating of either Baa or Prime-3 or above, or a Standard & Poor's Corporation rating of either BBB or A-3 or above, but does not include special debt securities; "ranking liabilities" (認可負債) means such liabilities and financial adjustments as are prescribed as ranking liabilities by section 10; "securities dealer" (證券交易商) means a dealer or a dealing partnership registered under the Securities Ordinance (Cap 333); "securities investment adviser" (證券投資顧問) means an investment adviser or investment advisers' partnership registered under the Securities Ordinance (Cap 333); "SEHK Traded Options" (在聯交所買賣期權) means options which are traded on the Unified Exchange and cleared by The SEHK Options Clearing House Limited; (L.N. 396 of 1995) "special debt securities" (特別債務證券) means indexed bonds, convertible debt securities, bonds with warrants and non-interest bearing debt securities- (a) which are listed on the Unified Exchange; (b) which are issued or guaranteed by the Government of Hong Kong, or by any government or central bank of an OECD country or of Singapore; or (c) the issuer of which has a Moody's Investors Service rating of either Baa or Prime-3 or above, or a Standard & Poor's Corporation rating of either BBB or A-3 or above. (Enacted 1993) "adjusted current assets" (經調整流動資產) "adjusted liabilities" (經調整負債) "adjusted net admissible assets" (經調整可接納資產淨值) "approved redeemable shares" (核准可贖回股份) "approved subordinated loan" (核准附屬貸款) "corporation" (法團) "foreign currency" (外幣) "foreign exchange agreement" (外匯議) "futures dealer" (期貨交易商) "futures trading adviser" (期貨交易顧問) "liquid assets" (速動資產) "liquid capital" (速動資金) "net tangible assets" (有形資產淨值) "OECD countries" (經濟合作及發展組織國家) "qualifying debt securities" (合資格債務證券) "ranking liabilities" (認可負債) "securities dealer" (證券交易商) "securities investment adviser" (證券投資顧問) "SEHK Traded Options" (在聯交所買賣期權) "special debt securities" (特別債務證券) FINANCIAL RESOURCES RULES - SECT 2 Interpretation VerDate:30/06/1997 In these Rules, unless the context otherwise requires- "adjusted current assets" (經調整流動資產) means such assets as are prescribed as adjusted current assets by section 15; "adjusted liabilities" (經調整負債) means such liabilities and financial adjustments as are prescribed as adjusted liabilities by section 16; "adjusted net admissible assets" (經調整可接納資產淨值) means net admissible assets less margin required to be deposited by a futures dealer with a clearing house or any of its clearing members, or with any person in respect of trading in futures contracts or options by the futures dealer on his own account; "approved redeemable shares" (核准可贖回股份) means shares in the share capital of a corporation, which are approved by the Commission for the purposes of these Rules, and are redeemable at the option of the holder of the shares or that of the corporation; "approved subordinated loan" (核准附屬貸款) means a loan, which is approved by the Commission for the purposes of these Rules, and under which the lender's claim is subordinated to the prior payment, or provision for payment, in full of all claims of all other present and future creditors of the borrower; "corporation" (法團) has the meaning assigned to it by section 2(1) of the Securities Ordinance (Cap 333); "foreign currency" (外幣) means, in relation to a registered person, any currency other than- (a) the currency used, or intended to be used, by that person in his annual accounts lodged with the Commission; and (b) any currency which has an exchange rate which is linked to the currency referred to in paragraph (a); "foreign exchange agreement" (外匯議) means an agreement whereby 2 parties agree to exchange different currencies at a future time; "futures dealer" (期貨交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250); "futures trading adviser" (期貨交易顧問) means a commodity trading adviser registered under the Commodities Trading Ordinance (Cap 250); "liquid assets" (速動資產) means such assets as are prescribed as liquid assets by section 9; "liquid capital" (速動資金) means the excess of liquid assets over ranking liabilities; "net tangible assets" (有形資產淨值) means, in relation to a registered person, total tangible assets beneficially owned by him less the aggregate of- (a) fixed assets beneficially owned by him; (b) his total liabilities, other than- (i) any liability that is not required to be settled within 12 months and is incurred for the purpose of financing the purchase or the holding of property and equipment used in the business for which he is registered, to the extent of the net realizable value of such property and equipment; and (ii) any approved subordinated loan; and (c) where the registered person is a corporation, the consideration at which redeemable shares have been issued by it but not redeemed, other than any approved redeemable shares; "OECD countries" (經濟合作及發展組織國家) means countries belonging to the Organisation for Economic Co-operation and Development; "qualifying debt securities" (合資格債務證券) means debenture stock, loan stock, debentures, bonds, notes and other securities or instruments acknowledging, evidencing or creating indebtedness- (a) which are listed on the Unified Exchange; (b) which are issued or guaranteed by the Government of Hong Kong, or by any government or central bank of an OECD country or of Singapore; or (c) the issuer of which has a Moody's Investors Service rating of either Baa or Prime-3 or above, or a Standard & Poor's Corporation rating of either BBB or A-3 or above, but does not include special debt securities; "ranking liabilities" (認可負債) means such liabilities and financial adjustments as are prescribed as ranking liabilities by section 10; "securities dealer" (證券交易商) means a dealer or a dealing partnership registered under the Securities Ordinance (Cap 333); "securities investment adviser" (證券投資顧問) means an investment adviser or investment advisers' partnership registered under the Securities Ordinance (Cap 333); "SEHK Traded Options" (在聯交所買賣期權) means options which are traded on the Unified Exchange and cleared by The SEHK Options Clearing House Limited; (L.N. 396 of 1995) "special debt securities" (特別債務證券) means indexed bonds, convertible debt securities, bonds with warrants and non-interest bearing debt securities- (a) which are listed on the Unified Exchange; (b) which are issued or guaranteed by the Government of Hong Kong, or by any government or central bank of an OECD country or of Singapore; or (c) the issuer of which has a Moody's Investors Service rating of either Baa or Prime-3 or above, or a Standard & Poor's Corporation rating of either BBB or A-3 or above. (Enacted 1993) "adjusted current assets" (經調整流動資產) "adjusted liabilities" (經調整負債) "adjusted net admissible assets" (經調整可接納資產淨值) "approved redeemable shares" (核准可贖回股份) "approved subordinated loan" (核准附屬貸款) "corporation" (法團) "foreign currency" (外幣) "foreign exchange agreement" (外匯議) "futures dealer" (期貨交易商) "futures trading adviser" (期貨交易顧問) "liquid assets" (速動資產) "liquid capital" (速動資金) "net tangible assets" (有形資產淨值) "OECD countries" (經濟合作及發展組織國家) "qualifying debt securities" (合資格債務證券) "ranking liabilities" (認可負債) "securities dealer" (證券交易商) "securities investment adviser" (證券投資顧問) "SEHK Traded Options" (在聯交所買賣期權) "special debt securities" (特別債務證券) FINANCIAL RESOURCES RULES - SECT 3 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 3 Application to unincorporated registered persons VerDate:30/06/1997 (1) These Rules shall not apply to a registered person who is an individual and who is registered by reason only that he is- (a) a director of a corporation that is registered; (b) a partner of a partnership or firm that is registered; or (c) an employee of a corporation, partnership, firm or individual who is so registered. (2) Where any of these Rules is expressed to provide for net tangible assets, liquid assets, ranking liabilities, adjusted current assets or adjusted liabilities of a registered person other than a corporation, or to refer to the total liabilities of such a person, that provision shall be construed as- (a) providing for net tangible assets, liquid assets, ranking liabilities, adjusted current assets or adjusted liabilities; or (b) referring to the total liabilities, as the case may be, of the registered person in the business for which the person is registered and in any other business carried on by the registered person under the same name as appears in the certificate of registration issued by the Commission under the Securities Ordinance (Cap 333) or the Commodities Trading Ordinance (Cap 250). (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 4 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 4 Generally accepted accounting principles VerDate:30/06/1997 For the purposes of these Rules, all calculations shall be made in accordance with generally accepted accounting principles unless otherwise specified. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 5 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 5 Interpretation VerDate:06/03/2000 PART II RULES RELATING TO PERSONS REGISTERED UNDER THE SECURITIES ORDINANCE In this Part, unless the context otherwise requires- "adjusted value" (經調整價值) in relation to any item, for the purposes of calculating ranking liabilities of a securities dealer under section 10, means its value to the extent that would be treated as his liquid assets if the item were beneficially owned by him; "authorized institution" (認可機構) has the meaning assigned to it by section 2(1) of the Banking Ordinance (Cap 155); "interest rate swap agreement" (掉期息率議) means an agreement whereby 2 parties agree to exchange a series of interest payments over time; "margin client" (保證金客戶) means, in relation to a securities dealer, a client- (a) on whose behalf the dealer purchases securities; and (b) who deposits with the dealer collateral against which the dealer provides the client with the finance for the purchase; "net underwriting commitment" (銷承擔淨額) means the total costs of subscribing for or purchasing securities underwritten or sub-underwritten by a securities dealer, other than securities which are sub-underwritten or further sub-underwritten by other persons; (80 of 1997 s. 102 "note issuance facility" (票據發行融通) means an arrangement whereby a borrower is able to issue short-term notes which a guarantor undertakes to purchase if unsold; "prescribed overseas bank" (訂明海外銀行) means a bank incorporated or established by or under the law or other authority of any OECD country or of Singapore or the central or government bank of Malaysia, the Philippines, South Korea or Thailand; (80 of 1997 s. 102) "repurchase transaction" (購回交易) means a sale of securities whereby the seller is obliged to repurchase from the buyer, or the buyer is obliged to resell to the seller, securities of the same description, at a pre-determined price; "securities borrowing" (證券借貸) means a transaction whereby a person borrows securities and gives an undertaking to return securities of the same description to the lender and includes the meaning of "stock borrowing" as in section 19 of the Stamp Duty Ordinance (Cap 117); "securities introducing broker" (證券介紹經紀) means a dealer or a dealing partnership registered under the Securities Ordinance (Cap 333) who does not handle clients' assets and who, in respect of the business for which he is registered, conducts no business other than- (a) receiving from others offers to effect dealings in, or to acquire or dispose of, securities and communicating them in the name of the persons from whom they are received to and exchange participants of the Unified Exchange or members of any stock market specified in Schedule 2; or (b) effecting introductions of persons to and exchange participants of the Unified Exchange or members of any stock market specified in Schedule 2 in order that those persons may effect dealings in, or make offers to acquire or dispose of, securities; (12 of 2000 s. 23) "settlement date" (交收日期), in relation to any dealing in securities by a securities dealer, means- (a) in the case of transactions on any stock market, the date on which payment for the securities is first due in accordance with the rules of the stock market; (b) in any other case, the date on which payment for the securities is first due as agreed between the parties, but in any case, not more than 20 bank trading days (excluding Saturdays) from the trade date; "short selling" (賣空) means a sale of securities which the seller does not beneficially own; "subsidiary" (附屬公司) has the meaning assigned to it by section 2 of the Companies Ordinance (Cap 32). (Enacted 1993) "adjusted value" (經調整價值) "authorized institution" (認可機構) "interest rate swap agreement" (掉期息率議) "margin client" (保證金客戶) "net underwriting commitment" (銷承擔淨額) "note issuance facility" (票據發行融通) "prescribed overseas bank" (訂明海外銀行) "repurchase transaction" (購回交易) "securities borrowing" (證券借貸) "securities introducing broker" (證券介紹經紀) "settlement date" (交收日期) "short selling" (賣空) "subsidiary" (附屬公司) FINANCIAL RESOURCES RULES - SECT 5 Interpretation VerDate:30/06/1997 PART II RULES RELATING TO PERSONS REGISTERED UNDER THE SECURITIES ORDINANCE In this Part, unless the context otherwise requires- "adjusted value" (經調整價值) in relation to any item, for the purposes of calculating ranking liabilities of a securities dealer under section 10, means its value to the extent that would be treated as his liquid assets if the item were beneficially owned by him; "authorized institution" (認可機構) has the meaning assigned to it by section 2(1) of the Banking Ordinance (Cap 155); "interest rate swap agreement" (掉期息率議) means an agreement whereby 2 parties agree to exchange a series of interest payments over time; "margin client" (保證金客戶) means, in relation to a securities dealer, a client- (a) on whose behalf the dealer purchases securities; and (b) who deposits with the dealer collateral against which the dealer provides the client with the finance for the purchase; "net underwriting commitment" (銷承擔淨額) means the total costs of subscribing for or purchasing securities underwritten or sub-underwritten by a securities dealer, other than securities which are sub-underwritten or further sub-underwritten by other persons; (80 of 1997 s. 102 "note issuance facility" (票據發行融通) means an arrangement whereby a borrower is able to issue short-term notes which a guarantor undertakes to purchase if unsold; "prescribed overseas bank" (訂明海外銀行) means a bank incorporated or established by or under the law or other authority of any OECD country or of Singapore or the central or government bank of Malaysia, the Philippines, South Korea or Thailand; (80 of 1997 s. 102) "repurchase transaction" (購回交易) means a sale of securities whereby the seller is obliged to repurchase from the buyer, or the buyer is obliged to resell to the seller, securities of the same description, at a pre-determined price; "securities borrowing" (證券借貸) means a transaction whereby a person borrows securities and gives an undertaking to return securities of the same description to the lender and includes the meaning of "stock borrowing" as in section 19 of the Stamp Duty Ordinance (Cap 117); "securities introducing broker" (證券介紹經紀) means a dealer or a dealing partnership registered under the Securities Ordinance (Cap 333) who does not handle clients' assets and who, in respect of the business for which he is registered, conducts no business other than- (a) receiving from others offers to effect dealings in, or to acquire or dispose of, securities and communicating them in the name of the persons from whom they are received to members of the Unified Exchange or of any stock market specified in Schedule 2; or (b) effecting introductions of persons to members of the Unified Exchange or of any stock market specified in Schedule 2 in order that those persons may effect dealings in, or make offers to acquire or dispose of, securities; "settlement date" (交收日期), in relation to any dealing in securities by a securities dealer, means- (a) in the case of transactions on any stock market, the date on which payment for the securities is first due in accordance with the rules of the stock market; (b) in any other case, the date on which payment for the securities is first due as agreed between the parties, but in any case, not more than 20 bank trading days (excluding Saturdays) from the trade date; "short selling" (賣空) means a sale of securities which the seller does not beneficially own; "subsidiary" (附屬公司) has the meaning assigned to it by section 2 of the Companies Ordinance (Cap 32). (Enacted 1993) "adjusted value" (經調整價值) "authorized institution" (認可機構) "interest rate swap agreement" (掉期息率議) "margin client" (保證金客戶) "net underwriting commitment" (銷承擔淨額) "note issuance facility" (票據發行融通) "prescribed overseas bank" (訂明海外銀行) "repurchase transaction" (購回交易) "securities borrowing" (證券借貸) "securities introducing broker" (證券介紹經紀) "settlement date" (交收日期) "short selling" (賣空) "subsidiary" (附屬公司) FINANCIAL RESOURCES RULES - SECT 6 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 6 Financial resources requirements for securities dealers (other than securities introducing brokers) VerDate:30/06/1997 (1) Subject to section 7, a securities dealer shall have and at all times maintain in the business for which he is registered, liquid capital of- (a) in the case of a corporation, not less than the higher of- (i) $3000000; (ii) an amount which is equal to 5% of its total liabilities; (b) in the case of an individual, not less than the higher of- (i) $500000; (ii) an amount which is equal to 5% of his total liabilities; and (c) in the case of a partnership, not less than the higher of- (i) the aggregate of $3000000 for each partner that is a corporation and $500000 for each partner who is an individual, being in either case a partner who is required to be registered under the Securities Ordinance (Cap 333); (ii) an amount which is equal to 5% of its total liabilities. (2) For the purposes of this section- (a) liabilities of a securities dealer shall be treated as arising, in relation to any dealing in securities, on the trade date; (b) total liabilities of a securities dealer shall include monies held by the securities dealer on trust for clients; and (c) total liabilities of a securities dealer shall on any date be taken as- (i) where the securities dealer has been registered under the Securities Ordinance (Cap 333) for more than 4 calendar quarters, the average of total liabilities on the last day of each of preceding 4 calendar quarters, but where these do not include total liabilities stated in the latest audited accounts of the securities dealer, the average of total liabilities on the last day of each of preceding 4 calendar quarters and total liabilities stated in his latest audited accounts; and (ii) in any other case, the average of total liabilities on the last day of each of preceding calendar quarters since the date of registration, but where these do not include total liabilities stated in the latest audited accounts of the securities dealer, the average of total liabilities on the last day of each of preceding calendar quarters since the date of registration and total liabilities stated in his latest audited accounts. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 7 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 7 Financial resources requirements for securities introducing brokers VerDate:30/06/1997 (1) A securities dealer who has satisfied the Commission that he is a securities introducing broker shall have and at all times maintain in the business for which he is registered, liquid capital of- (a) in the case of a corporation, not less than the higher of- (i) $500000; (ii) an amount which is equal to 5% of its total liabilities; (b) in the case of an individual, not less than the higher of- (i) $500000; (ii) an amount which is equal to 5% of his total liabilities; and (c) in the case of a partnership, not less than the higher of- (i) the aggregate of $500000 for each partner, whether a corporation or an individual, who is required to be registered under the Securities Ordinance (Cap 333); (ii) an amount which is equal to 5% of its total liabilities. (2) For the purposes of this section- (a) liabilities of a securities introducing broker shall be treated as arising, in relation to any dealing in securities on his own account, on the trade date; and (b) total liabilities of a securities introducing broker shall on any date be calculated in the same manner as for a securities dealer under section 6(2)(c). (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 8 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 8 Financial resources requirements for securities investment advisers VerDate:30/06/1997 A securities investment adviser shall have and at all times maintain in the business for which he is registered net tangible assets of not less than zero. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 9 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 9 Liquid assets VerDate:06/03/2000 The following assets are liquid assets of a securities dealer for the purposes of this Part if they are beneficially owned by him (except where the context otherwise requires) and shall be calculated in accordance with this section and section 11- (a) cash in hand; (b) money which is on account with an authorized institution (other than branches outside Hong Kong of the authorized institution) and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (23 of 1998 s. 2) (c) money which is on account with a prescribed overseas bank or a branch outside Hong Kong of an authorized institution incorporated in Hong Kong and is freely remittable to Hong Kong and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (23 of 1998 s. 2) (d) interest accrued on qualifying or special debt securities where the interest is not included in their market price; (e) transfer deed stamps; (f) deposits paid to the Unified Exchange to be used for the purposes of the Stamp Duty Ordinance (Cap 117); (g) prepaid operating expenses where such expenses will be incurred within 3 months; (h) tax reserve certificates issued under the Tax Reserve Certificates Ordinance (Cap 289); (i) fees, commissions and commission rebates which have accrued, or which are receivable and remain outstanding for not more than 2 weeks after they are first due for payment, in the ordinary course of business for which the securities dealer is registered; (j) 90% by market value of gold coin and gold bullion; (k) 90% by market value of investments which are specified as investment arrangements under the Protection of Investors (Gold Purchase) Order (Cap 335 sub. leg.) and are authorized by the Commission under section 4(2)(g) of the Protection of Investors Ordinance (Cap 335); (l) subject to section 11(8) and (10)- (i) the percentage by market value of shares of any description specified in Part I of Schedule 1; or (ii) the percentage by market value of shares of any description specified in Part II of Schedule 1, if the securities dealer has elected for that Part to apply for the purposes of this section; (m) dividends receivable on shares of any description specified in Schedule 1, when they are being traded on an ex-dividend basis; (n) 60% by market value of any warrants that are listed on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (o) 90% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (p) 80% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on any stock market specified in Part II of Schedule 2; (q) 80% by market value of units in any unit trust, and of shares in any mutual fund corporation, which is authorized- (i) under section 15(1) of the Securities Ordinance (Cap 333); or (ii) by any of the recognised jurisdictions specified in the Code on Unit Trusts and Mutual Funds published by the Commission, but in the case of warrant funds or leveraged funds referred to in that Code, 60% by market value of units and shares in such funds; (r) subject to section 11(9) and (10)- (i) the percentage by market value of qualifying debt securities of any description specified in Part I of Schedule 3; or (ii) the percentage by market value of qualifying debt securities of any description specified in Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (s) subject to section 11(9) and (10), the market value of indexed bonds to the extent permitted by paragraph (l) in relation to the shares constituting the index; (t) subject to section 11(9) and (10), in the case of convertible debt securities or bonds with warrants- (i) where their market value exceeds their par or nominal value, that market value to the extent permitted by paragraph (l) in relation to their underlying shares; (ii) where their market value is equal to, or less than, their par or nominal value, that market value to the extent permitted by Part I of Schedule 3 or, if the securities dealer has elected for Part II of Schedule 3 to apply for the purposes of this section, to the extent permitted by that Part; (u) subject to section 11(9) and (10), in the case of non-interest bearing debt securities, 95% of that proportion of their market value which is permitted by- (i) Part I of Schedule 3; or (ii) Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (v) amounts receivable from, and cash deposited with, the Hong Kong Securities Clearing Company Limited other than admission fees paid to it and contributions towards its Guarantee Fund; (w) subject to paragraphs (xa) and (z), amounts receivable from clients (other than margin clients) in the ordinary course of business of dealing in securities which remain outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (x) where the securities dealer is an individual or a partnership- (i) any debit balance due from the individual or a partner of the partnership in the accounts receivable in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; and (ii) any other debit balance due from the individual or a partner of the partnership in the accounts receivable in the ordinary course of business of dealing in securities which remains outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (xa) premium receivable from another person in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; (L.N. 396 of 1995) (y) where the securities dealer purchases securities on behalf of a client and the amount receivable from that client is due to be settled against delivery of the securities and remains outstanding for more than 5 bank trading days (excluding Saturdays) but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the securities dealer has elected for Table A to apply in all cases for the purposes of this paragraph, the percentage of the amount receivable that is specified in that Table; TABLE A Period for which amounts receivable fromclients remain outstanding from the settlement date Percentage 6 bank trading days (excluding Saturdays) but not more than 2 weeks 80% More than 2 weeks but not more than 1 month 50% (z) where the securities dealer subscribes for securities on behalf of a client, the lower of- (i) 90% of the total costs of subscribing for the securities; and (ii) the amount receivable from that client in respect of the subscription for the securities; (za) subject to paragraph (xa), amounts receivable from other securities dealers, whether registered in Hong Kong or authorized elsewhere, in the ordinary course of business of dealing in securities, and which remain outstanding for not more than 2 weeks from the settlement date; (L.N. 396 of 1995) (zb) where the securities dealer (the "selling dealer") sells securities to another securities dealer, whether registered in Hong Kong or authorized elsewhere, and the amount receivable from that other securities dealer is due to be settled against delivery of the securities and remains outstanding for more than 2 weeks but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the selling dealer has elected for 50% of the amount receivable to apply in all cases for the purposes of this paragraph, 50% of the amount receivable; (zc) amounts receivable from any margin client, calculated on a client by client basis, in the ordinary course of business of dealing in securities, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of any collateral provided by the client, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer, provided that the collateral is- (A) unencumbered and in the possession or control of the securities dealer; (B) encumbered only by being deposited or pledged by the securities dealer with an authorized institution for the purposes of financing the trading of the client; or (C) encumbered only by being deposited or pledged by the securities dealer in a securities borrowing; (zd) amounts which will become receivable within 2 months, other than in the ordinary course of business of dealing in securities, and which are secured by collateral prescribed as liquid assets in this section, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of the collateral, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer; (ze) where the securities dealer trades in futures contracts on his own account, or trades in index futures contracts on behalf of clients- (i) cash deposited with any clearing house specified in Schedule 4 or any of its clearing members or participants, in respect of such trading; (ii) any floating profits due from any clearing house specified in Schedule 4 or any of its clearing members or participants in respect of such trading on his own account; and (iii) any interest accrued on cash deposits referred to in subparagraph (i); (12 of 2000 s. 23) (zf) where the securities dealer purchases on his own account options traded on any options market specified in Schedule 5- (i) in case of SEHK Traded Options and where the rules and regulations of the Unified Exchange and of The SEHK Options Clearing House Limited allow netting between market value of options purchased and margin requirements of any other options positions of the securities dealer, the net credit balance so calculated whether or not the securities dealer is an exchange participant of the Unified Exchange or a clearing participant of The SEHK Options Clearing House Limited; and (L.N. 396 of 1995; 12 of 2000 s. 23) (ii) in any other case, 60% of the market value of his options; (zg) where the securities dealer purchases or writes options, either on his own account or on behalf of clients- (i) margin in the form of cash deposited with any clearing house specified in Schedule 4 or any of its clearing members or participants in respect of the purchasing, writing or exercise of such options; and (L.N. 396 of 1995; 12 of 2000 s. 23) (ii) any interest accrued on cash deposits referred to in subparagraph (i); (zh) where the securities dealer is a party to an interest rate swap agreement, interest accrued under the agreement, other than any amount which remains outstanding after it is first due for payment; (zi) cash held as margin by the Japanese Securities Finance Company, the Osaka Securities Finance Company, the Chubu Securities Finance Company, or any stock market specified in Schedule 2 or their clearing houses or clearing members or participants, in respect of short selling of securities by the securities dealer either on his own account or on behalf of clients and any interest accrued thereon; (12 of 2000 s. 23) (zj) where the securities dealer is the lender of securities in a securities borrowing, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; (zk) where the securities dealer is the borrower of securities in a securities borrowing, cash provided by him as collateral; (zl) in connection with a securities borrowing, fees receivable by- (i) the securities dealer as a lender, for granting the borrower the use of the securities borrowed; or (ii) the securities dealer as a borrower, for enabling the lender to hold cash as collateral, but excluding any fees which remain outstanding for more than 2 weeks from the date on which they are first due for payment; (zm) where the securities dealer is the seller of securities in a repurchase transaction, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; and (zn) where the securities dealer is the buyer of securities in a repurchase transaction, the pre-determined repurchase price at which he is obliged to resell, or the seller is obliged to repurchase, the securities. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 9 Liquid assets VerDate:01/07/1997 Amendments retroactively made - see 23 of 1998 s. 2 The following assets are liquid assets of a securities dealer for the purposes of this Part if they are beneficially owned by him (except where the context otherwise requires) and shall be calculated in accordance with this section and section 11- (a) cash in hand; (b) money which is on account with an authorized institution (other than branches outside Hong Kong of the authorized institution) and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (23 of 1998 s. 2) (c) money which is on account with a prescribed overseas bank or a branch outside Hong Kong of an authorized institution incorporated in Hong Kong and is freely remittable to Hong Kong and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (23 of 1998 s. 2) (d) interest accrued on qualifying or special debt securities where the interest is not included in their market price; (e) transfer deed stamps; (f) deposits paid to the Unified Exchange to be used for the purposes of the Stamp Duty Ordinance (Cap 117); (g) prepaid operating expenses where such expenses will be incurred within 3 months; (h) tax reserve certificates issued under the Tax Reserve Certificates Ordinance (Cap 289); (i) fees, commissions and commission rebates which have accrued, or which are receivable and remain outstanding for not more than 2 weeks after they are first due for payment, in the ordinary course of business for which the securities dealer is registered; (j) 90% by market value of gold coin and gold bullion; (k) 90% by market value of investments which are specified as investment arrangements under the Protection of Investors (Gold Purchase) Order (Cap 335 sub. leg.) and are authorized by the Commission under section 4(2)(g) of the Protection of Investors Ordinance (Cap 335); (l) subject to section 11(8) and (10)- (i) the percentage by market value of shares of any description specified in Part I of Schedule 1; or (ii) the percentage by market value of shares of any description specified in Part II of Schedule 1, if the securities dealer has elected for that Part to apply for the purposes of this section; (m) dividends receivable on shares of any description specified in Schedule 1, when they are being traded on an ex-dividend basis; (n) 60% by market value of any warrants that are listed on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (o) 90% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (p) 80% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on any stock market specified in Part II of Schedule 2; (q) 80% by market value of units in any unit trust, and of shares in any mutual fund corporation, which is authorized- (i) under section 15(1) of the Securities Ordinance (Cap 333); or (ii) by any of the recognised jurisdictions specified in the Code on Unit Trusts and Mutual Funds published by the Commission, but in the case of warrant funds or leveraged funds referred to in that Code, 60% by market value of units and shares in such funds; (r) subject to section 11(9) and (10)- (i) the percentage by market value of qualifying debt securities of any description specified in Part I of Schedule 3; or (ii) the percentage by market value of qualifying debt securities of any description specified in Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (s) subject to section 11(9) and (10), the market value of indexed bonds to the extent permitted by paragraph (l) in relation to the shares constituting the index; (t) subject to section 11(9) and (10), in the case of convertible debt securities or bonds with warrants- (i) where their market value exceeds their par or nominal value, that market value to the extent permitted by paragraph (l) in relation to their underlying shares; (ii) where their market value is equal to, or less than, their par or nominal value, that market value to the extent permitted by Part I of Schedule 3 or, if the securities dealer has elected for Part II of Schedule 3 to apply for the purposes of this section, to the extent permitted by that Part; (u) subject to section 11(9) and (10), in the case of non-interest bearing debt securities, 95% of that proportion of their market value which is permitted by- (i) Part I of Schedule 3; or (ii) Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (v) amounts receivable from, and cash deposited with, the Hong Kong Securities Clearing Company Limited other than admission fees paid to it and contributions towards its Guarantee Fund; (w) subject to paragraphs (xa) and (z), amounts receivable from clients (other than margin clients) in the ordinary course of business of dealing in securities which remain outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (x) where the securities dealer is an individual or a partnership- (i) any debit balance due from the individual or a partner of the partnership in the accounts receivable in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; and (ii) any other debit balance due from the individual or a partner of the partnership in the accounts receivable in the ordinary course of business of dealing in securities which remains outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (xa) premium receivable from another person in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; (L.N. 396 of 1995) (y) where the securities dealer purchases securities on behalf of a client and the amount receivable from that client is due to be settled against delivery of the securities and remains outstanding for more than 5 bank trading days (excluding Saturdays) but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the securities dealer has elected for Table A to apply in all cases for the purposes of this paragraph, the percentage of the amount receivable that is specified in that Table; TABLE A Period for which amounts receivable fromclients remain outstanding from the settlement date Percentage 6 bank trading days (excluding Saturdays) but not more than 2 weeks 80% More than 2 weeks but not more than 1 month 50% (z) where the securities dealer subscribes for securities on behalf of a client, the lower of- (i) 90% of the total costs of subscribing for the securities; and (ii) the amount receivable from that client in respect of the subscription for the securities; (za) subject to paragraph (xa), amounts receivable from other securities dealers, whether registered in Hong Kong or authorized elsewhere, in the ordinary course of business of dealing in securities, and which remain outstanding for not more than 2 weeks from the settlement date; (L.N. 396 of 1995) (zb) where the securities dealer (the "selling dealer") sells securities to another securities dealer, whether registered in Hong Kong or authorized elsewhere, and the amount receivable from that other securities dealer is due to be settled against delivery of the securities and remains outstanding for more than 2 weeks but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the selling dealer has elected for 50% of the amount receivable to apply in all cases for the purposes of this paragraph, 50% of the amount receivable; (zc) amounts receivable from any margin client, calculated on a client by client basis, in the ordinary course of business of dealing in securities, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of any collateral provided by the client, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer, provided that the collateral is- (A) unencumbered and in the possession or control of the securities dealer; (B) encumbered only by being deposited or pledged by the securities dealer with an authorized institution for the purposes of financing the trading of the client; or (C) encumbered only by being deposited or pledged by the securities dealer in a securities borrowing; (zd) amounts which will become receivable within 2 months, other than in the ordinary course of business of dealing in securities, and which are secured by collateral prescribed as liquid assets in this section, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of the collateral, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer; (ze) where the securities dealer trades in futures contracts on his own account, or trades in index futures contracts on behalf of clients- (i) cash deposited with any clearing house specified in Schedule 4 or any of its clearing members, in respect of such trading; (ii) any floating profits due from any clearing house specified in Schedule 4 or any of its clearing members in respect of such trading on his own account; and (iii) any interest accrued on cash deposits referred to in subparagraph (i); (zf) where the securities dealer purchases on his own account options traded on any options market specified in Schedule 5- (i) in case of SEHK Traded Options and where the rules and regulations of the Unified Exchange and of The SEHK Options Clearing House Limited allow netting between market value of options purchased and margin requirements of any other options positions of the securities dealer, the net credit balance so calculated whether or not the securities dealer is a member of the Unified Exchange or The SEHK Options Clearing House Limited; and (L.N. 396 of 1995) (ii) in any other case, 60% of the market value of his options; (zg) where the securities dealer purchases or writes options, either on his own account or on behalf of clients- (i) margin in the form of cash deposited with any clearing house specified in Schedule 4 or any of its clearing members in respect of the purchasing, writing or exercise of such options; and (L.N. 396 of 1995) (ii) any interest accrued on cash deposits referred to in subparagraph (i); (zh) where the securities dealer is a party to an interest rate swap agreement, interest accrued under the agreement, other than any amount which remains outstanding after it is first due for payment; (zi) cash held as margin by the Japanese Securities Finance Company, the Osaka Securities Finance Company, the Chubu Securities Finance Company, or any stock market specified in Schedule 2 or their clearing houses or clearing members, in respect of short selling of securities by the securities dealer either on his own account or on behalf of clients and any interest accrued thereon; (zj) where the securities dealer is the lender of securities in a securities borrowing, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; (zk) where the securities dealer is the borrower of securities in a securities borrowing, cash provided by him as collateral; (zl) in connection with a securities borrowing, fees receivable by- (i) the securities dealer as a lender, for granting the borrower the use of the securities borrowed; or (ii) the securities dealer as a borrower, for enabling the lender to hold cash as collateral, but excluding any fees which remain outstanding for more than 2 weeks from the date on which they are first due for payment; (zm) where the securities dealer is the seller of securities in a repurchase transaction, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; and (zn) where the securities dealer is the buyer of securities in a repurchase transaction, the pre-determined repurchase price at which he is obliged to resell, or the seller is obliged to repurchase, the securities. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 9 Liquid assets VerDate:30/06/1997 The following assets are liquid assets of a securities dealer for the purposes of this Part if they are beneficially owned by him (except where the context otherwise requires) and shall be calculated in accordance with this section and section 11- (a) cash in hand; (b) money which is on account with an authorized institution (other than overseas branches of the authorized institution) and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (c) money which is on account with a prescribed overseas bank or an overseas branch of an authorized institution incorporated in Hong Kong and is freely remittable to Hong Kong and which, in the case of a time deposit, will become payable within 6 months, together with interest accrued; (d) interest accrued on qualifying or special debt securities where the interest is not included in their market price; (e) transfer deed stamps; (f) deposits paid to the Unified Exchange to be used for the purposes of the Stamp Duty Ordinance (Cap 117); (g) prepaid operating expenses where such expenses will be incurred within 3 months; (h) tax reserve certificates issued under the Tax Reserve Certificates Ordinance (Cap 289); (i) fees, commissions and commission rebates which have accrued, or which are receivable and remain outstanding for not more than 2 weeks after they are first due for payment, in the ordinary course of business for which the securities dealer is registered; (j) 90% by market value of gold coin and gold bullion; (k) 90% by market value of investments which are specified as investment arrangements under the Protection of Investors (Gold Purchase) Order (Cap 335 sub. leg.) and are authorized by the Commission under section 4(2)(g) of the Protection of Investors Ordinance (Cap 335); (l) subject to section 11(8) and (10)- (i) the percentage by market value of shares of any description specified in Part I of Schedule 1; or (ii) the percentage by market value of shares of any description specified in Part II of Schedule 1, if the securities dealer has elected for that Part to apply for the purposes of this section; (m) dividends receivable on shares of any description specified in Schedule 1, when they are being traded on an ex-dividend basis; (n) 60% by market value of any warrants that are listed on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (o) 90% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (p) 80% of payments made for the subscription for or purchase of shares by the securities dealer on his own account for which a listing is pending on any stock market specified in Part II of Schedule 2; (q) 80% by market value of units in any unit trust, and of shares in any mutual fund corporation, which is authorized- (i) under section 15(1) of the Securities Ordinance (Cap 333); or (ii) by any of the recognised jurisdictions specified in the Code on Unit Trusts and Mutual Funds published by the Commission, but in the case of warrant funds or leveraged funds referred to in that Code, 60% by market value of units and shares in such funds; (r) subject to section 11(9) and (10)- (i) the percentage by market value of qualifying debt securities of any description specified in Part I of Schedule 3; or (ii) the percentage by market value of qualifying debt securities of any description specified in Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (s) subject to section 11(9) and (10), the market value of indexed bonds to the extent permitted by paragraph (l) in relation to the shares constituting the index; (t) subject to section 11(9) and (10), in the case of convertible debt securities or bonds with warrants- (i) where their market value exceeds their par or nominal value, that market value to the extent permitted by paragraph (l) in relation to their underlying shares; (ii) where their market value is equal to, or less than, their par or nominal value, that market value to the extent permitted by Part I of Schedule 3 or, if the securities dealer has elected for Part II of Schedule 3 to apply for the purposes of this section, to the extent permitted by that Part; (u) subject to section 11(9) and (10), in the case of non-interest bearing debt securities, 95% of that proportion of their market value which is permitted by- (i) Part I of Schedule 3; or (ii) Part II of Schedule 3, if the securities dealer has elected for that Part to apply for the purposes of this section; (v) amounts receivable from, and cash deposited with, the Hong Kong Securities Clearing Company Limited other than admission fees paid to it and contributions towards its Guarantee Fund; (w) subject to paragraphs (xa) and (z), amounts receivable from clients (other than margin clients) in the ordinary course of business of dealing in securities which remain outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (x) where the securities dealer is an individual or a partnership- (i) any debit balance due from the individual or a partner of the partnership in the accounts receivable in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; and (ii) any other debit balance due from the individual or a partner of the partnership in the accounts receivable in the ordinary course of business of dealing in securities which remains outstanding for not more than 5 bank trading days (excluding Saturdays) from the settlement date; (L.N. 396 of 1995) (xa) premium receivable from another person in respect of a purchase of a SEHK Traded Option which remains outstanding for not more than one bank trading day (excluding Saturday) from the day of the purchase of the SEHK Traded Option; (L.N. 396 of 1995) (y) where the securities dealer purchases securities on behalf of a client and the amount receivable from that client is due to be settled against delivery of the securities and remains outstanding for more than 5 bank trading days (excluding Saturdays) but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the securities dealer has elected for Table A to apply in all cases for the purposes of this paragraph, the percentage of the amount receivable that is specified in that Table; TABLE A Period for which amounts receivable from clients remain outstanding from the settlement date Percentage 6 bank trading days (excluding Saturdays) but not more than 2 weeks 80% More than 2 weeks but not more than 1 month 50% (z) where the securities dealer subscribes for securities on behalf of a client, the lower of- (i) 90% of the total costs of subscribing for the securities; and (ii) the amount receivable from that client in respect of the subscription for the securities; (za) subject to paragraph (xa), amounts receivable from other securities dealers, whether registered in Hong Kong or authorized elsewhere, in the ordinary course of business of dealing in securities, and which remain outstanding for not more than 2 weeks from the settlement date; (L.N. 396 of 1995) (zb) where the securities dealer (the "selling dealer") sells securities to another securities dealer, whether registered in Hong Kong or authorized elsewhere, and the amount receivable from that other securities dealer is due to be settled against delivery of the securities and remains outstanding for more than 2 weeks but not more than 1 month from the settlement date, the lower of- (i) the amount receivable less any provision made for bad and doubtful debts; and (ii) market value of the securities, or if the selling dealer has elected for 50% of the amount receivable to apply in all cases for the purposes of this paragraph, 50% of the amount receivable; (zc) amounts receivable from any margin client, calculated on a client by client basis, in the ordinary course of business of dealing in securities, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of any collateral provided by the client, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer, provided that the collateral is- (A) unencumbered and in the possession or control of the securities dealer; (B) encumbered only by being deposited or pledged by the securities dealer with an authorized institution for the purposes of financing the trading of the client; or (C) encumbered only by being deposited or pledged by the securities dealer in a securities borrowing; (zd) amounts which will become receivable within 2 months, other than in the ordinary course of business of dealing in securities, and which are secured by collateral prescribed as liquid assets in this section, which shall be taken as the lower of- (i) the amounts receivable less any provision made for bad and doubtful debts; and (ii) the value of the collateral, to the extent that would be permitted by this section if the collateral were beneficially owned by the securities dealer; (ze) where the securities dealer trades in futures contracts on his own account, or trades in index futures contracts on behalf of clients- (i) cash deposited with any clearing house specified in Schedule 4 or any of its clearing members, in respect of such trading; (ii) any floating profits due from any clearing house specified in Schedule 4 or any of its clearing members in respect of such trading on his own account; and (iii) any interest accrued on cash deposits referred to in subparagraph (i); (zf) where the securities dealer purchases on his own account options traded on any options market specified in Schedule 5- (i) in case of SEHK Traded Options and where the rules and regulations of the Unified Exchange and of The SEHK Options Clearing House Limited allow netting between market value of options purchased and margin requirements of any other options positions of the securities dealer, the net credit balance so calculated whether or not the securities dealer is a member of the Unified Exchange or The SEHK Options Clearing House Limited; and (L.N. 396 of 1995) (ii) in any other case, 60% of the market value of his options; (zg) where the securities dealer purchases or writes options, either on his own account or on behalf of clients- (i) margin in the form of cash deposited with any clearing house specified in Schedule 4 or any of its clearing members in respect of the purchasing, writing or exercise of such options; and (L.N. 396 of 1995) (ii) any interest accrued on cash deposits referred to in subparagraph (i); (zh) where the securities dealer is a party to an interest rate swap agreement, interest accrued under the agreement, other than any amount which remains outstanding after it is first due for payment; (zi) cash held as margin by the Japanese Securities Finance Company, the Osaka Securities Finance Company, the Chubu Securities Finance Company, or any stock market specified in Schedule 2 or their clearing houses or clearing members, in respect of short selling of securities by the securities dealer either on his own account or on behalf of clients and any interest accrued thereon; (zj) where the securities dealer is the lender of securities in a securities borrowing, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; (zk) where the securities dealer is the borrower of securities in a securities borrowing, cash provided by him as collateral; (zl) in connection with a securities borrowing, fees receivable by- (i) the securities dealer as a lender, for granting the borrower the use of the securities borrowed; or (ii) the securities dealer as a borrower, for enabling the lender to hold cash as collateral, but excluding any fees which remain outstanding for more than 2 weeks from the date on which they are first due for payment; (zm) where the securities dealer is the seller of securities in a repurchase transaction, the value of the securities to the extent that would be permitted by this section if they were beneficially owned by the securities dealer; and (zn) where the securities dealer is the buyer of securities in a repurchase transaction, the pre-determined repurchase price at which he is obliged to resell, or the seller is obliged to repurchase, the securities. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 10 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 10 Ranking liabilities VerDate:01/07/1997 Amendments retroactively made - see 23 of 1998 s. 2 The following liabilities and financial adjustments of a securities dealer are ranking liabilities for the purposes of this Part and shall be calculated in accordance with this section and section 11- (a) amounts payable in the ordinary course of business of dealing in securities; (b) overdrafts and loans from authorized institutions or banks formed or established outside Hong Kong; (23 of 1998 s. 2) (c) accrued expenses; (d) the amount by which any prepaid tax is exceeded by tax payable; (e) provision made for contingent liabilities; (f) subject to paragraph (g), where the securities dealer sells securities on behalf of a client, and the client has been in default of his obligation to deliver the securities for more than 2 weeks from the settlement date, and the securities dealer has not settled the sale with securities purchased on his own account- (i) the amount by which the price at which the securities were sold is exceeded by the market value of the securities; or (ii) if the securities dealer has elected for Table B to apply in all cases for the purposes of this paragraph, the percentage of the price at which the securities were sold that is specified in that Table; TABLE B Period of default since settlement date Percentage More than 2 weeks but not more than 1 month 20% More than 1 month but not more than 2 months 50% More than 2 months 100% (g) where the securities dealer sells securities on behalf of a client, and the client has been in default of his obligation to deliver the securities for more than 5 bank trading days (excluding Saturdays) from the settlement date, if- (i) the securities dealer has not settled the sale with securities purchased on his own account; and (ii) the market value of the securities is more than 200% of the price at which they were sold, the amount by which the price at which the securities were sold is exceeded by their market value; (h) 10% of the amount of any guarantee provided by the securities dealer, other than any guarantee provided by him- (i) for the purpose of the fidelity fund established under the rules of the Unified Exchange; (ii) to the Hong Kong Securities Clearing Company Limited in respect of securities allocated by it to his stock clearing account under the continuous net settlement system; (L.N. 396 of 1995) (iia) to The SEHK Options Clearing House Limited for the purposes of meeting all of his obligations as required under its rules (except those related to the reserve fund established under the same rules in which case 10% of the amount of that guarantee shall be included as ranking liabilities); or (L.N. 396 of 1995) (iii) for his own liabilities and obligations; (i) where the securities dealer is a corporation, any amount by which the total liabilities of any subsidiary (other than any amounts due to the securities dealer) exceed the assets of that subsidiary; (j) where the securities dealer is a corporation, the consideration at which redeemable shares have been issued by it but not redeemed, other than any approved redeemable shares; (k) 5% of the difference between- (i) the aggregate of the value of assets beneficially owned by the securities dealer which are denominated in a foreign currency and the amount of the same foreign currency which he is obliged to purchase under any foreign exchange agreement; and (ii) the aggregate of his liabilities which are denominated in that foreign currency and the amount of that foreign currency which he is obliged to sell under any foreign exchange agreement; (l) where the securities dealer is a party to an interest rate swap agreement, the principal amount which is in the same currency as that in which interest payments are to be received by the securities dealer multiplied by the percentage specified in Part I of Schedule 6; (m) where the securities dealer is a party to a foreign exchange agreement, the amount of currency to be received by the securities dealer under the agreement multiplied by the percentage specified in Part II of Schedule 6; (n) where the securities dealer is a guarantor to a note issuance facility, the total costs of purchasing short-term notes which he undertakes to purchase if unsold, multiplied by the percentage specified in Table C; TABLE C Remaining term of the note issuance facility Percentage Not more than 1 year 1% More than 1 year but not more than 5 years 2.5% More than 5 years 5% (o) subject to paragraph (p), where the securities dealer underwrites or sub-underwrites an issue or a sale of securities, the amount of the net underwriting commitment multiplied by the percentage specified in Part I of Table D; (p) where the securities dealer underwrites or sub-underwrites a rights issue of securities- (i) if the market value of the securities is less than or equal to their subscription price, the aggregate of- (A) the net underwriting commitment multiplied by the percentage specified in Part I of Table D; and (B) the amount by which the market value of the securities is exceeded by the net underwriting commitment; (ii) if the market value of the securities is greater than their subscription price, the amount of the net underwriting commitment, multiplied by the percentage specified in Part II of Table D; TABLE D PART I Description Percentage Securities listed, or pending listing, on the Unified Exchange or any stock market specified in Schedule 2 10% Any other securities 50% PART II Securities listed on the Unified Exchange or any stock market specified in Schedule 2 1% Any other securities 5% (q) where the securities dealer trades in futures contracts on his own account, floating losses incurred by him in respect of such contracts; (r) where the securities dealer trades in index futures contracts, writes options, or clears index futures contracts or options, on behalf of another person, the higher of the following calculated on an account by account basis in respect of such trading, writing or clearing- (i) cash margin received from that other person; and (ii) subject to section 11(16), the amount by which the aggregate of the margin required to be deposited with him by that other person and of floating losses incurred by that other person (unless the floating losses have been included in the calculation of the margin required to be deposited) exceeds the aggregate of- (A) floating profits made by that other person (unless the floating profits have been included in the calculation of the margin required to be deposited); and (B) the adjusted value of any collateral (excluding cash) deposited with him by that other person; (L.N. 396 of 1995) (s) where the securities dealer on his own account writes options which are traded on any options market specified in Schedule 5, the market value of any options written by him unless the market value has been included in the calculation of the amount of margin required in paragraph (t)(ii); (L.N. 396 of 1995) (t) subject to section 11(16), the amount of margin required to be deposited by the securities dealer in respect of- (L.N. 396 of 1995) (i) futures contracts traded on his own account; and (ii) options purchased or written by him, which are traded on any options market specified in Schedule 5; (u) where the securities dealer on his own account writes options which are not traded on any options market specified in Schedule 5, an amount equivalent to- (i) twice the market value; or (ii) where there is no market value, twice the value of the options calculated in accordance with generally accepted option pricing models; (v) subject to paragraph (w), where the securities dealer short sells securities on his own account, the amount by which the adjusted value of the securities is exceeded by twice their market value; (w) subject to section 11(12), where the securities dealer short sells securities on his own account, twice the market value of the securities if- (i) they are not of a type referred to in section 9; (ii) they constitute more than 5% by market value of all securities, or of any class of securities, issued by a corporation; or (iii) the trading of the securities is suspended for more than 2 bank trading days (excluding Saturdays); (x) subject to section 11(17), where the securities dealer short sells securities on behalf of clients, the amount by which the aggregate of- (L.N. 396 of 1995) (i) the adjusted value of any collateral received by him from clients; and (ii) the amounts payable by him to clients in respect of the short sales, is exceeded by the difference between- (A) twice the market value of the securities; and (B) the adjusted value of the securities; (y) where the securities dealer is the borrower of securities in a securities borrowing, the amount by which the adjusted value of the securities is exceeded by the adjusted value of any collateral (other than a letter of credit) provided to the lender; (z) where the securities dealer is the lender of securities in a securities borrowing (except where he short sells securities on behalf of a client and he is a lender of such securities to the client in a securities borrowing), the amount by which the adjusted value of the securities exceeds the value of any collateral provided by the borrower, taking the value of the collateral for these purposes as limited to- (L.N. 396 of 1995) (i) if the collateral is a letter of credit, the maximum amount that could be drawn under that letter of credit; and (ii) in any other case, its adjusted value; (za) where the securities dealer is the seller of securities in a repurchase transaction, the aggregate of- (i) the consideration received by him for the securities; and (ii) if the buyer is a government, body or person referred to in Part I of Table E, the amount which results from multiplying the pre-determined repurchase price of the securities by the appropriate percentage specified in that Part and then further multiplying the product by the appropriate percentage specified in Part II of that Table; and (iii) in any other case, the higher of- (A) the amount, if any, by which the market value of the securities exceeds 150% of the pre-determined repurchase price of the securities; and (B) the amount which results from multiplying 10% of the pre-determined repurchase price of the securities by the appropriate percentage specified in Part II of Table E; (zb) where the securities dealer is the buyer of securities in a repurchase transaction, the aggregate of- (i) the adjusted value of the securities; and (ii) if the seller is a government, body or person referred to in Part I of Table E, the amount which results from multiplying the pre-determined repurchase price of the securities by the appropriate percentage specified in that Part and then further multiplying the product by the appropriate percentage specified in Part II of that Table; and (iii) in any other case, the higher of- (A) the amount, if any, by which the pre-determined repurchase price of the securities exceeds the market value of the securities; and (B) the amount which results from multiplying 10% of the pre-determined repurchase price of the securities by the appropriate percentage specified in Part II of Table E; and TABLE E PART I Identity of party with whom the securities dealer enters into the repurchase transaction Percentage Government of Hong Kong, or government or central bank of any OECD country or of Singapore 2% A securities dealer, whether registered in Hong Kong or authorized in any OECD country or Singapore, an authorized institution, or a prescribed overseas bank 5% PART II Securities that are the subject of the repurchase transaction Percentage Qualifying or special debt securities with remaining term to maturity of not more than 1 year 5% Qualifying or special debt securities with remaining term to maturity of more than 1year 10% Shares listed on the Unified Exchange, American Stock Exchange, London Stock Exchange, Nagoya Stock Exchange, New York Stock Exchange, Osaka Securities Exchange or Tokyo Stock Exchange 20% Any other securities 100% (zc) all other liabilities that are regarded as liabilities under generally accepted accounting principles, other than- (i) any liability that is not required to be settled within 12 months and is incurred for the purpose of financing the purchase or the holding of property and equipment used in the business for which he is registered, to the extent of the net realizable value of such property and equipment; and (ii) any approved subordinated loan. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 10 Ranking liabilities VerDate:30/06/1997 The following liabilities and financial adjustments of a securities dealer are ranking liabilities for the purposes of this Part and shall be calculated in accordance with this section and section 11- (a) amounts payable in the ordinary course of business of dealing in securities; (b) overdrafts and loans from authorized institutions or overseas banks; (c) accrued expenses; (d) the amount by which any prepaid tax is exceeded by tax payable; (e) provision made for contingent liabilities; (f) subject to paragraph (g), where the securities dealer sells securities on behalf of a client, and the client has been in default of his obligation to deliver the securities for more than 2 weeks from the settlement date, and the securities dealer has not settled the sale with securities purchased on his own account- (i) the amount by which the price at which the securities were sold is exceeded by the market value of the securities; or (ii) if the securities dealer has elected for Table B to apply in all cases for the purposes of this paragraph, the percentage of the price at which the securities were sold that is specified in that Table; TABLE B Period of default since settlement date Percentage More than 2 weeks but not more than 1 month 20% More than 1 month but not more than 2 months 50% More than 2 months 100% (g) where the securities dealer sells securities on behalf of a client, and the client has been in default of his obligation to deliver the securities for more than 5 bank trading days (excluding Saturdays) from the settlement date, if- (i) the securities dealer has not settled the sale with securities purchased on his own account; and (ii) the market value of the securities is more than 200% of the price at which they were sold, the amount by which the price at which the securities were sold is exceeded by their market value; (h) 10% of the amount of any guarantee provided by the securities dealer, other than any guarantee provided by him- (i) for the purpose of the fidelity fund established under the rules of the Unified Exchange; (ii) to the Hong Kong Securities Clearing Company Limited in respect of securities allocated by it to his stock clearing account under the continuous net settlement system; (L.N. 396 of 1995) (iia) to The SEHK Options Clearing House Limited for the purposes of meeting all of his obligations as required under its rules (except those related to the reserve fund established under the same rules in which case 10% of the amount of that guarantee shall be included as ranking liabilities); or (L.N. 396 of 1995) (iii) for his own liabilities and obligations; (i) where the securities dealer is a corporation, any amount by which the total liabilities of any subsidiary (other than any amounts due to the securities dealer) exceed the assets of that subsidiary; (j) where the securities dealer is a corporation, the consideration at which redeemable shares have been issued by it but not redeemed, other than any approved redeemable shares; (k) 5% of the difference between- (i) the aggregate of the value of assets beneficially owned by the securities dealer which are denominated in a foreign currency and the amount of the same foreign currency which he is obliged to purchase under any foreign exchange agreement; and (ii) the aggregate of his liabilities which are denominated in that foreign currency and the amount of that foreign currency which he is obliged to sell under any foreign exchange agreement; (l) where the securities dealer is a party to an interest rate swap agreement, the principal amount which is in the same currency as that in which interest payments are to be received by the securities dealer multiplied by the percentage specified in Part I of Schedule 6; (m) where the securities dealer is a party to a foreign exchange agreement, the amount of currency to be received by the securities dealer under the agreement multiplied by the percentage specified in Part II of Schedule 6; (n) where the securities dealer is a guarantor to a note issuance facility, the total costs of purchasing short-term notes which he undertakes to purchase if unsold, multiplied by the percentage specified in Table C; TABLE C Remaining term of the note issuance facility Percentage Not more than 1 year 1% More than 1 year but not more than 5 years 2.5% More than 5 years 5% (o) subject to paragraph (p), where the securities dealer underwrites or sub-underwrites an issue or a sale of securities, the amount of the net underwriting commitment multiplied by the percentage specified in Part I of Table D; (p) where the securities dealer underwrites or sub-underwrites a rights issue of securities- (i) if the market value of the securities is less than or equal to their subscription price, the aggregate of- (A) the net underwriting commitment multiplied by the percentage specified in Part I of Table D; and (B) the amount by which the market value of the securities is exceeded by the net underwriting commitment; (ii) if the market value of the securities is greater than their subscription price, the amount of the net underwriting commitment, multiplied by the percentage specified in Part II of Table D; TABLE D PART I Description Percentage Securities listed, or pending listing, on the Unified Exchange or any stock market specified in Schedule 2 10% Any other securities 50% PART II Securities listed on the Unified Exchange or any stock market specified in Schedule 2 1% Any other securities 5% (q) where the securities dealer trades in futures contracts on his own account, floating losses incurred by him in respect of such contracts; (r) where the securities dealer trades in index futures contracts, writes options, or clears index futures contracts or options, on behalf of another person, the higher of the following calculated on an account by account basis in respect of such trading, writing or clearing- (i) cash margin received from that other person; and (ii) subject to section 11(16), the amount by which the aggregate of the margin required to be deposited with him by that other person and of floating losses incurred by that other person (unless the floating losses have been included in the calculation of the margin required to be deposited) exceeds the aggregate of- (A) floating profits made by that other person (unless the floating profits have been included in the calculation of the margin required to be deposited); and (B) the adjusted value of any collateral (excluding cash) deposited with him by that other person; (L.N. 396 of 1995) (s) where the securities dealer on his own account writes options which are traded on any options market specified in Schedule 5, the market value of any options written by him unless the market value has been included in the calculation of the amount of margin required in paragraph (t)(ii); (L.N. 396 of 1995) (t) subject to section 11(16), the amount of margin required to be deposited by the securities dealer in respect of- (L.N. 396 of 1995) (i) futures contracts traded on his own account; and (ii) options purchased or written by him, which are traded on any options market specified in Schedule 5; (u) where the securities dealer on his own account writes options which are not traded on any options market specified in Schedule 5, an amount equivalent to- (i) twice the market value; or (ii) where there is no market value, twice the value of the options calculated in accordance with generally accepted option pricing models; (v) subject to paragraph (w), where the securities dealer short sells securities on his own account, the amount by which the adjusted value of the securities is exceeded by twice their market value; (w) subject to section 11(12), where the securities dealer short sells securities on his own account, twice the market value of the securities if- (i) they are not of a type referred to in section 9; (ii) they constitute more than 5% by market value of all securities, or of any class of securities, issued by a corporation; or (iii) the trading of the securities is suspended for more than 2 bank trading days (excluding Saturdays); (x) subject to section 11(17), where the securities dealer short sells securities on behalf of clients, the amount by which the aggregate of- (L.N. 396 of 1995) (i) the adjusted value of any collateral received by him from clients; and (ii) the amounts payable by him to clients in respect of the short sales, is exceeded by the difference between- (A) twice the market value of the securities; and (B) the adjusted value of the securities; (y) where the securities dealer is the borrower of securities in a securities borrowing, the amount by which the adjusted value of the securities is exceeded by the adjusted value of any collateral (other than a letter of credit) provided to the lender; (z) where the securities dealer is the lender of securities in a securities borrowing (except where he short sells securities on behalf of a client and he is a lender of such securities to the client in a securities borrowing), the amount by which the adjusted value of the securities exceeds the value of any collateral provided by the borrower, taking the value of the collateral for these purposes as limited to- (L.N. 396 of 1995) (i) if the collateral is a letter of credit, the maximum amount that could be drawn under that letter of credit; and (ii) in any other case, its adjusted value; (za) where the securities dealer is the seller of securities in a repurchase transaction, the aggregate of- (i) the consideration received by him for the securities; and (ii) if the buyer is a government, body or person referred to in Part I of Table E, the amount which results from multiplying the pre-determined repurchase price of the securities by the appropriate percentage specified in that Part and then further multiplying the product by the appropriate percentage specified in Part II of that Table; and (iii) in any other case, the higher of- (A) the amount, if any, by which the market value of the securities exceeds 150% of the pre-determined repurchase price of the securities; and (B) the amount which results from multiplying 10% of the pre-determined repurchase price of the securities by the appropriate percentage specified in Part II of Table E; (zb) where the securities dealer is the buyer of securities in a repurchase transaction, the aggregate of- (i) the adjusted value of the securities; and (ii) if the seller is a government, body or person referred to in Part I of Table E, the amount which results from multiplying the pre-determined repurchase price of the securities by the appropriate percentage specified in that Part and then further multiplying the product by the appropriate percentage specified in Part II of that Table; and (iii) in any other case, the higher of- (A) the amount, if any, by which the pre-determined repurchase price of the securities exceeds the market value of the securities; and (B) the amount which results from multiplying 10% of the pre-determined repurchase price of the securities by the appropriate percentage specified in Part II of Table E; and TABLE E PART I Identity of party with whom the securities dealer enters into the repurchase transaction Percentage Government of Hong Kong, or government or central bank of any OECD country or of Singapore 2% A securities dealer, whether registered in Hong Kong or authorized in any OECD country or Singapore, an authorized institution, or a prescribed overseas bank 5% PART II Securities that are the subject of the repurchase transaction Percentage Qualifying or special debt securities with remaining term to maturity of not more than 1 year 5% Qualifying or special debt securities with remaining term to maturity of more than 1year 10% Shares listed on the Unified Exchange, American Stock Exchange, London Stock Exchange, Nagoya Stock Exchange, New York Stock Exchange, Osaka Securities Exchange or Tokyo Stock Exchange 20% Any other securities 100% (zc) all other liabilities that are regarded as liabilities under generally accepted accounting principles, other than- (i) any liability that is not required to be settled within 12 months and is incurred for the purpose of financing the purchase or the holding of property and equipment used in the business for which he is registered, to the extent of the net realizable value of such property and equipment; and (ii) any approved subordinated loan. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 11 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 11 Calculation of liquid assets and ranking liabilities VerDate:06/03/2000 (1) (a) Where a securities dealer deals in securities (other than SEHK Traded Options) on his own account, all liquid assets and ranking liabilities arising out of the dealing shall be included in his liquid assets or, as the case may be, his ranking liabilities on a trade date basis. (L.N. 396 of 1995) (b) A securities dealer- (i) shall not include in his liquid assets or ranking liabilities an exercised SEHK Traded Option purchased or written by him on his own account; and (ii) shall, immediately upon the exercise of that SEHK Traded Option, include in his liquid assets and ranking liabilities all liquid assets and ranking liabilities arising from such exercise as if such exercise were a purchase or sale, as the case may be, of the underlying shares. (L.N. 396 of 1995) (c) A securities dealer shall, immediately upon the exercise of a SEHK Traded Option purchased, written or cleared by him on behalf of another person, include in his liquid assets and ranking liabilities all liquid assets and ranking liabilities arising from such exercise as if such exercise were a purchase or sale, as the case may be, of the underlying shares on behalf of that other person. (L.N. 396 of 1995) (2) For the purposes of calculating the liquid assets of a securities dealer, the value of any securities the trading of which is suspended for more than 2 bank trading days (excluding Saturdays) shall be zero. (3) Notwithstanding anything in section 9, any assets which are given by a securities dealer to others as security for any liabilities or obligations shall not be included as liquid assets of the securities dealer except where the assets are given- (a) as security for the securities dealer's banking facility; (b) as security in a securities borrowing; (c) as margin in respect of trading in futures contracts and options; (d) to obtain a bank guarantee for the purpose of the fidelity fund established under the rules of the Unified Exchange; (L.N. 396 of 1995) (e) as security to the Hong Kong Securities Clearing Company Limited or as security for the bank guarantee to the Hong Kong Securities Clearing Company Limited in respect of securities allocated by it to his stock clearing account under the continuous net settlement system; or (L.N. 396 of 1995) (f) as security to The SEHK Options Clearing House Limited or as security for a bank guarantee to The SEHK Options Clearing House Limited in respect of his obligations to it. (L.N. 396 of 1995) (4) Notwithstanding anything in section 9, amounts which are receivable from outside Hong Kong by a securities dealer and which are not freely remittable to Hong Kong shall not be included as liquid assets of the securities dealer. (5) For the purposes of calculating the amounts receivable under section 9(y) and (zb), and amounts to be included as ranking liabilities under section 10(f) and (g), such amounts shall be calculated on a transaction by transaction basis. (6) (a) There shall be no set off between any amount receivable under section 9(w), (x)(ii), (y), (z), (za) and (zb) and any amount payable under section 10(a), unless the amount receivable is owed by, and the amount payable is owed to, the same person, and relate to the same securities. (L.N. 396 of 1995) (b) There shall be no set off between any amount receivable under section 9(x)(i) and (xa) and any amount payable under section 10(a). (L.N. 396 of 1995) (7) For the purposes of calculating amounts receivable under section 9(w), (y), (z) and (zc), there shall be disregarded any assignment of amounts receivable from, and of collateral provided by, clients unless- (a) the assignee is an authorized institution or a securities dealer; (b) the assignment is made on the condition that there shall be no claims by the assignee against the securities dealer in relation to the assignment; and (c) the client by whom the amounts receivable are owed has been notified of the assignment. (8) Subject to subsection (12), where a securities dealer holds 5% or more of the entire issued share capital, or of any class of the issued share capital, of a company and the shares which he holds are of any description specified in Schedule 1, their value as liquid assets shall be further reduced below what is provided for in that Schedule by the amount specified in Part I of Schedule 7. (9) Subject to subsection (12), where a securities dealer holds 25% or more of all qualifying or special debt securities, or of any class of qualifying or special debt securities, issued by an issuer, their value as liquid assets shall be further reduced below what is provided for in section 9(r), (s), (t) or (u) by the amount specified in Part II of Schedule 7. (10) Subject to subsections (11) and (12), where the aggregate of the market value of any shares in a company held by a securities dealer, which are of any description specified in Schedule 1, and the market value of qualifying or special debt securities issued by that company held by him, exceeds 25% in value of the liquid capital of the securities dealer- (a) the value of the shares as liquid assets shall be further reduced by the amount specified in Part III of Schedule 7; and (b) the value of the qualifying or special debt securities as liquid assets shall be further reduced by the amount specified in Part III of Schedule 7. (11) For the purposes of calculating the liquid capital of a securities dealer in subsection (10), no account shall be taken of the adjustments in the liquid capital by virtue of subsection (10)(a) and (b). (12) For the purposes of subsections (8), (9) and (10) and section 10(w), the number of shares or the amount of qualifying or special debt securities held, or short sold, by a securities dealer shall be taken as the difference between- (a) the aggregate of- (i) the number of shares or amount of qualifying or special debt securities held by him; (ii) the number of shares or amount of qualifying or special debt securities which he is under an obligation to purchase or subscribe; and (iii) the number of shares or amount of qualifying or special debt securities which he is entitled to purchase or subscribe under any option where the strike price of the option is less than the market value of the shares or qualifying or special debt securities; and (L.N. 396 of 1995) (b) the aggregate of- (i) the number of shares or amount of qualifying or special debt securities short sold by him; (ii) the number of shares or amount of qualifying or special debt securities which he is under an obligation to sell; and (iii) the number of shares or amount of qualifying or special debt securities which he is entitled to sell under any option where the strike price of the option is more than the market value of the shares or qualifying or special debt securities. (L.N. 396 of 1995) (13) Where a securities dealer deposits the underlying shares with The SEHK Options Clearing House Limited to cover a short call SEHK Traded Option- (a) in case where he beneficially holds the underlying shares, to the extent that the number of the shares underlying the call option matches the number of the shares held, sections 9(l) and 10(s) and (t) shall not apply and he shall value his shares at the lower of- (i) the market value of the shares multiplied by the relevant percentage specified in Part II of Schedule 1; and (ii) the strike price of the call option; and (b) in any other case, to the extent that the number of the shares underlying the call option matches the number of the shares deposited, section 10(s), (t) and (y) shall not apply and he shall include the higher of the following in his ranking liabilities- (i) the amount of margin required to be deposited by the securities dealer as calculated in accordance with subsection (16) in respect of the short call SEHK Traded Option as if the position were not a covered position; and (ii) the amount by which the adjusted value of the shares is exceeded by the adjusted value of any collateral (other than a letter of credit) provided to any person for obtaining the shares. (L.N. 396 of 1995) (14) Where a securities dealer beneficially holds shares and hedges them by holding a put SEHK Traded Option on the same underlying shares, to the extent that the number of the shares underlying the put option matches the number of the shares held and the market value of the option has not been netted off with the margin requirement of any other options position of the securities dealer, he may elect so that section 9(l) and (zf) shall not apply and he shall value his shares at the higher of- (a) the market value of shares multiplied by the relevant percentage specified in Part II of Schedule 1; and (b) the strike price of the put option. (L.N. 396 of 1995) (15) Where a securities dealer borrows shares listed on the Unified Exchange for the purpose of short selling on his own account, the securities dealer may elect so that section 10(v), (w) and (y) shall not apply at the same time and he shall include the higher of the following in his ranking liabilities- (a) the amount as calculated under section 10(v) and (w); and (b) the aggregate of the amount as calculated under section 10(y) and the market value of the shares short sold. (L.N. 396 of 1995) (16) For the purposes of section 10(r)(ii) and (t) and subsection (13), the amount of margin required to be deposited shall not be less than the debit balance of the margin requirement calculated in accordance with the rules and regulations of the relevant exchanges or clearing houses whether or not the securities dealer is an exchange participant or clearing participant in relation to the relevant exchanges or clearing houses, as the case may be. (L.N. 396 of 1995; 12 of 2000 s. 23) (17) For the purposes of section 10(x), no financial adjustment shall be made to the ranking liabilities of a securities dealer if- (a) he is not the lender of the securities to the clients in a securities borrowing; and (b) (i) the clients have delivered the securities to him; or (ii) the short sold securities are not due for settlement. (L.N. 396 of 1995) (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 11 Calculation of liquid assets and ranking liabilities VerDate:30/06/1997 (1) (a) Where a securities dealer deals in securities (other than SEHK Traded Options) on his own account, all liquid assets and ranking liabilities arising out of the dealing shall be included in his liquid assets or, as the case may be, his ranking liabilities on a trade date basis. (L.N. 396 of 1995) (b) A securities dealer- (i) shall not include in his liquid assets or ranking liabilities an exercised SEHK Traded Option purchased or written by him on his own account; and (ii) shall, immediately upon the exercise of that SEHK Traded Option, include in his liquid assets and ranking liabilities all liquid assets and ranking liabilities arising from such exercise as if such exercise were a purchase or sale, as the case may be, of the underlying shares. (L.N. 396 of 1995) (c) A securities dealer shall, immediately upon the exercise of a SEHK Traded Option purchased, written or cleared by him on behalf of another person, include in his liquid assets and ranking liabilities all liquid assets and ranking liabilities arising from such exercise as if such exercise were a purchase or sale, as the case may be, of the underlying shares on behalf of that other person. (L.N. 396 of 1995) (2) For the purposes of calculating the liquid assets of a securities dealer, the value of any securities the trading of which is suspended for more than 2 bank trading days (excluding Saturdays) shall be zero. (3) Notwithstanding anything in section 9, any assets which are given by a securities dealer to others as security for any liabilities or obligations shall not be included as liquid assets of the securities dealer except where the assets are given- (a) as security for the securities dealer's banking facility; (b) as security in a securities borrowing; (c) as margin in respect of trading in futures contracts and options; (d) to obtain a bank guarantee for the purpose of the fidelity fund established under the rules of the Unified Exchange; (L.N. 396 of 1995) (e) as security to the Hong Kong Securities Clearing Company Limited or as security for the bank guarantee to the Hong Kong Securities Clearing Company Limited in respect of securities allocated by it to his stock clearing account under the continuous net settlement system; or (L.N. 396 of 1995) (f) as security to The SEHK Options Clearing House Limited or as security for a bank guarantee to The SEHK Options Clearing House Limited in respect of his obligations to it. (L.N. 396 of 1995) (4) Notwithstanding anything in section 9, amounts which are receivable from outside Hong Kong by a securities dealer and which are not freely remittable to Hong Kong shall not be included as liquid assets of the securities dealer. (5) For the purposes of calculating the amounts receivable under section 9(y) and (zb), and amounts to be included as ranking liabilities under section 10(f) and (g), such amounts shall be calculated on a transaction by transaction basis. (6) (a) There shall be no set off between any amount receivable under section 9(w), (x)(ii), (y), (z), (za) and (zb) and any amount payable under section 10(a), unless the amount receivable is owed by, and the amount payable is owed to, the same person, and relate to the same securities. (L.N. 396 of 1995) (b) There shall be no set off between any amount receivable under section 9(x)(i) and (xa) and any amount payable under section 10(a). (L.N. 396 of 1995) (7) For the purposes of calculating amounts receivable under section 9(w), (y), (z) and (zc), there shall be disregarded any assignment of amounts receivable from, and of collateral provided by, clients unless- (a) the assignee is an authorized institution or a securities dealer; (b) the assignment is made on the condition that there shall be no claims by the assignee against the securities dealer in relation to the assignment; and (c) the client by whom the amounts receivable are owed has been notified of the assignment. (8) Subject to subsection (12), where a securities dealer holds 5% or more of the entire issued share capital, or of any class of the issued share capital, of a company and the shares which he holds are of any description specified in Schedule 1, their value as liquid assets shall be further reduced below what is provided for in that Schedule by the amount specified in Part I of Schedule 7. (9) Subject to subsection (12), where a securities dealer holds 25% or more of all qualifying or special debt securities, or of any class of qualifying or special debt securities, issued by an issuer, their value as liquid assets shall be further reduced below what is provided for in section 9(r), (s), (t) or (u) by the amount specified in Part II of Schedule 7. (10) Subject to subsections (11) and (12), where the aggregate of the market value of any shares in a company held by a securities dealer, which are of any description specified in Schedule 1, and the market value of qualifying or special debt securities issued by that company held by him, exceeds 25% in value of the liquid capital of the securities dealer- (a) the value of the shares as liquid assets shall be further reduced by the amount specified in Part III of Schedule 7; and (b) the value of the qualifying or special debt securities as liquid assets shall be further reduced by the amount specified in Part III of Schedule 7. (11) For the purposes of calculating the liquid capital of a securities dealer in subsection (10), no account shall be taken of the adjustments in the liquid capital by virtue of subsection (10)(a) and (b). (12) For the purposes of subsections (8), (9) and (10) and section 10(w), the number of shares or the amount of qualifying or special debt securities held, or short sold, by a securities dealer shall be taken as the difference between- (a) the aggregate of- (i) the number of shares or amount of qualifying or special debt securities held by him; (ii) the number of shares or amount of qualifying or special debt securities which he is under an obligation to purchase or subscribe; and (iii) the number of shares or amount of qualifying or special debt securities which he is entitled to purchase or subscribe under any option where the strike price of the option is less than the market value of the shares or qualifying or special debt securities; and (L.N. 396 of 1995) (b) the aggregate of- (i) the number of shares or amount of qualifying or special debt securities short sold by him; (ii) the number of shares or amount of qualifying or special debt securities which he is under an obligation to sell; and (iii) the number of shares or amount of qualifying or special debt securities which he is entitled to sell under any option where the strike price of the option is more than the market value of the shares or qualifying or special debt securities. (L.N. 396 of 1995) (13) Where a securities dealer deposits the underlying shares with The SEHK Options Clearing House Limited to cover a short call SEHK Traded Option- (a) in case where he beneficially holds the underlying shares, to the extent that the number of the shares underlying the call option matches the number of the shares held, sections 9(l) and 10(s) and (t) shall not apply and he shall value his shares at the lower of- (i) the market value of the shares multiplied by the relevant percentage specified in Part II of Schedule 1; and (ii) the strike price of the call option; and (b) in any other case, to the extent that the number of the shares underlying the call option matches the number of the shares deposited, section 10(s), (t) and (y) shall not apply and he shall include the higher of the following in his ranking liabilities- (i) the amount of margin required to be deposited by the securities dealer as calculated in accordance with subsection (16) in respect of the short call SEHK Traded Option as if the position were not a covered position; and (ii) the amount by which the adjusted value of the shares is exceeded by the adjusted value of any collateral (other than a letter of credit) provided to any person for obtaining the shares. (L.N. 396 of 1995) (14) Where a securities dealer beneficially holds shares and hedges them by holding a put SEHK Traded Option on the same underlying shares, to the extent that the number of the shares underlying the put option matches the number of the shares held and the market value of the option has not been netted off with the margin requirement of any other options position of the securities dealer, he may elect so that section 9(l) and (zf) shall not apply and he shall value his shares at the higher of- (a) the market value of shares multiplied by the relevant percentage specified in Part II of Schedule 1; and (b) the strike price of the put option. (L.N. 396 of 1995) (15) Where a securities dealer borrows shares listed on the Unified Exchange for the purpose of short selling on his own account, the securities dealer may elect so that section 10(v), (w) and (y) shall not apply at the same time and he shall include the higher of the following in his ranking liabilities- (a) the amount as calculated under section 10(v) and (w); and (b) the aggregate of the amount as calculated under section 10(y) and the market value of the shares short sold. (L.N. 396 of 1995) (16) For the purposes of section 10(r)(ii) and (t) and subsection (13), the amount of margin required to be deposited shall not be less than the debit balance of the margin requirement calculated in accordance with the rules and regulations of the relevant exchanges or clearing houses whether or not the securities dealer is a member of the relevant exchanges or clearing houses. (L.N. 396 of 1995) (17) For the purposes of section 10(x), no financial adjustment shall be made to the ranking liabilities of a securities dealer if- (a) he is not the lender of the securities to the clients in a securities borrowing; and (b) (i) the clients have delivered the securities to him; or (ii) the short sold securities are not due for settlement. (L.N. 396 of 1995) (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 12 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 12 Interpretation VerDate:06/03/2000 PART III RULES RELATING TO PERSONS REGISTERED UNDER THE COMMODITIES TRADING ORDINANCE In this Part, unless the context otherwise requires- "clients' funds" (客戶資金) means, in respect of trading in futures contracts or options on behalf of clients by a futures dealer, the amount by which the aggregate of- (a) cash margin and other monies deposited by clients with the futures dealer; (b) floating profits made by clients; and (c) other amounts payable to clients, exceeds floating losses incurred by clients, calculated on a client by client basis; "futures general clearing dealer" (期貨通用結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is entitled to clear- (a) futures contracts or options entered into on his own account or on behalf of clients in Hong Kong or elsewhere; (b) futures contracts or options entered into by others in Hong Kong or elsewhere; "futures individual clearing dealer" (期貨獨立結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is entitled to clear futures contracts or options entered into on his own account or on behalf of clients in Hong Kong or elsewhere, but not futures contracts or options entered into by others; "futures introducing broker" (期貨介紹經紀) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who does not handle clients' assets and who, in respect of the business for which he is registered, conducts no business other than- (a) receiving from others offers to trade in futures contracts or options, and communicating them in the name of the persons from whom they are received to exchange participants of the Commodity Exchange or members of any exchange specified in Schedule 2 to the Commodities Trading Ordinance (Cap 250); or (b) effecting introductions of persons to exchange participants of the Commodity Exchange or members of any exchange specified in Schedule 2 to the Commodities Trading Ordinance (Cap 250) in order that those persons may trade in futures contracts or options; (12 of 2000 s. 23) "futures non-clearing dealer" (期貨非結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is not entitled to clear futures contracts or options entered into in Hong Kong or elsewhere; "net admissible assets" (可接納貨產淨值) means the excess of adjusted current assets over adjusted liabilities. (Enacted 1993) "clients' funds" (客戶資金) "futures general clearing dealer" (期貨通用結算交易商) "futures individual clearing dealer" (期貨獨立結算交易商) "futures introducing broker" (期貨介紹經紀) "futures non-clearing dealer" (期貨非結算交易商) "net admissible assets" (可接納貨產淨值) FINANCIAL RESOURCES RULES - SECT 12 Interpretation VerDate:30/06/1997 PART III RULES RELATING TO PERSONS REGISTERED UNDER THE COMMODITIES TRADING ORDINANCE In this Part, unless the context otherwise requires- "clients' funds" (客戶資金) means, in respect of trading in futures contracts or options on behalf of clients by a futures dealer, the amount by which the aggregate of- (a) cash margin and other monies deposited by clients with the futures dealer; (b) floating profits made by clients; and (c) other amounts payable to clients, exceeds floating losses incurred by clients, calculated on a client by client basis; "futures general clearing dealer" (期貨通用結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is entitled to clear- (a) futures contracts or options entered into on his own account or on behalf of clients in Hong Kong or elsewhere; (b) futures contracts or options entered into by others in Hong Kong or elsewhere; "futures individual clearing dealer" (期貨獨立結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is entitled to clear futures contracts or options entered into on his own account or on behalf of clients in Hong Kong or elsewhere, but not futures contracts or options entered into by others; "futures introducing broker" (期貨介紹經紀) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who does not handle clients' assets and who, in respect of the business for which he is registered, conducts no business other than- (a) receiving from others offers to trade in futures contracts or options, and communicating them in the name of the persons from whom they are received to members of the Commodity Exchange or of any exchange specified in Schedule 2 to the Commodities Trading Ordinance (Cap 250); or (b) effecting introductions of persons to members of the Commodity Exchange or of any exchange specified in Schedule 2 to the Commodities Trading Ordinance (Cap 250) in order that those persons may trade in futures contracts or options; "futures non-clearing dealer" (期貨非結算交易商) means a dealer registered under the Commodities Trading Ordinance (Cap 250) who is not entitled to clear futures contracts or options entered into in Hong Kong or elsewhere; "net admissible assets" (可接納貨產淨值) means the excess of adjusted current assets over adjusted liabilities. (Enacted 1993) "clients' funds" (客戶資金) "futures general clearing dealer" (期貨通用結算交易商) "futures individual clearing dealer" (期貨獨立結算交易商) "futures introducing broker" (期貨介紹經紀) "futures non-clearing dealer" (期貨非結算交易商) "net admissible assets" (可接納貨產淨值) FINANCIAL RESOURCES RULES - SECT 13 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 13 Financial resources requirements for futures dealers VerDate:30/06/1997 (1) Subject to subsection (4), a futures non-clearing dealer shall have and at all times maintain in the business for which he is registered, adjusted net admissible assets of not less than- (a) $250000; or (b) if he trades in futures contracts or options on behalf of clients, the higher of- (i) $1250000; (ii) an amount which is equal to 4% of clients' funds. (2) Subject to subsection (4), a futures individual clearing dealer shall have and at all times maintain in the business for which he is registered, adjusted net admissible assets of not less than- (a) $1000000; or (b) if he trades in futures contracts or options on behalf of clients, the higher of- (i) $2500000; (ii) an amount which is equal to 4% of clients' funds. (3) Subject to subsection (4), a futures general clearing dealer, whether or not he trades in futures contracts or options on behalf of clients, shall have and at all times maintain in the business for which he is registered, adjusted net admissible assets of not less than the higher of- (a) $12500000; or (b) an amount which is equal to 4% of clients' funds. (4) A futures dealer who has satisfied the Commission that he is a futures introducing broker shall have and at all times maintain in the business for which he is registered, adjusted net admissible assets of not less than $500000. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 14 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 14 Financial resources requirements for futures trading advisers VerDate:30/06/1997 A futures trading adviser shall have and at all times maintain in the business for which he is registered, net tangible assets of not less than zero. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 15 (Repealed L.N. 103 of 2000) VerDate:12/06/2000 FINANCIAL RESOURCES RULES - SECT 15 Adjusted current assets VerDate:06/03/2000 The following assets are adjusted current assets of a futures dealer for the purposes of this Part if they are beneficially owned by him (except where the context otherwise requires) and shall be calculated in accordance with this section and section 17- (a) cash in hand; (b) money which is on account with a bank or deposit-taking company and which, in the case of a time deposit, will become payable within 12 months; (c) the percentage by market value of shares of any description specified in Part I of Schedule 1; (d) the percentage by market value of qualifying or special debt securities of any description specified in Part I of Schedule 3; (e) 60% by market value of any warrants that are listed on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (f) fees, commissions and commission rebates which have accrued, or which are receivable and remain outstanding for not more than 1 month, in the ordinary course of business of trading in futures contracts or options from other futures dealers, or from clearing participants or clearing members of any clearing house specified in Schedule 4; (12 of 2000 s. 23) (g) amounts receivable from, and cash deposited with, other futures dealers, any clearing house specified in Schedule 4, or any of its clearing participants or clearing members, in respect of trading in futures contracts or options either on his own account or on behalf of clients and any interest accrued on such cash deposits; (12 of 2000 s. 23) (h) floating profits due from any clearing house specified in Schedule 4, or from any of its clearing participants or clearing members, in respect of trading in futures contracts on his own account; (12 of 2000 s. 23) (i) 90% by market value of gold coin and gold bullion; (j) 90% by market value of investments which are specified as investment arrangements under the Protection of Investors (Gold Purchase) Order (Cap 335 sub. leg.) and are authorized by the Commission under section 4(2)(g) of the Protection of Investors Ordinance (Cap 335); (k) when the futures dealer purchases on his own account options traded on any options market specified in Schedule 5- (i) the market value of his options if he has deposited margin in respect of such purchasing with any clearing house specified in Schedule 4 or any of their clearing participants or clearing members; and (L.N. 396 of 1995; 12 of 2000 s. 23) (ii) in any other case, 60% of the market value of his options; and (l) all other current assets (after any provision made for bad and doubtful debts) which are expected to be realised within 12 months, other than- (i) amounts receivable from clients in the ordinary course of business of trading in futures contracts or options which are not secured and which remain outstanding for more than 3 bank trading days (excluding Saturdays); (ii) all other amounts receivable which are not secured, whether or not arising in the ordinary course of business of trading in futures contracts or options; (iii) prepaid expenses; (iv) securities and investments not included as adjusted current assets by virtue of paragraph (c), (d), (e), (j) or (k); (v) commodities which are capable of being delivered; (vi) equity interests in, and participantship or membership costs paid to, any exchange or clearing house; and (12 of 2000 s. 23) (vii) contributions towards any compensation fund or scheme. (Enacted 1993) FINANCIAL RESOURCES RULES - SECT 15 Adjusted current assets VerDate:30/06/1997 The following assets are adjusted current assets of a futures dealer for the purposes of this Part if they are beneficially owned by him (except where the context otherwise requires) and shall be calculated in accordance with this section and section 17- (a) cash in hand; (b) money which is on account with a bank or deposit-taking company and which, in the case of a time deposit, will become payable within 12 months; (c) the percentage by market value of shares of any description specified in Part I of Schedule 1; (d) the percentage by market value of qualifying or special debt securities of any description specified in Part I of Schedule 3; (e) 60% by market value of any warrants that are listed on the Unified Exchange or on any stock market specified in Part I of Schedule 2; (f) fees, commissions and commission rebates which have accrued, or which are receivable and remain outstanding for not more than 1 month, in the ordinary course of business of trading in futures contracts or options from other futures dealers, or from clearing members of any clearing house specified in Schedule 4; (g) amounts receivable from, and cash deposited with, other futures dealers, any clearing house specified in Schedule 4, or any of its clearing members, in respect of trading in futures contracts or options either on his own account or on behalf of cl