Hong Kong Regulations

SECURITIES AND FUTURES (INSURANCE) RULES - SCHEDULE 1

SPECIFIED RISKS

[section 2]

1. The risks in relation to which a specified licensed corporation shall take
out and maintain insurance under these Rules are the risks of loss arising out
of the loss of client assets that are received or held by the
specified licensed corporation (including client assets that are received or
held by an associated entity of the specified licensed  corporation) in
relation to its carrying on in Hong Kong of a regulated activity, attributable
to-

   (a)  fraudulent or dishonest conduct by employees of the specified 
        licensed corporation (or its associated entity or service bureau);

   (b)  robbery or theft while the client assets are in the custody of the
        specified licensed corporation (or its associated entity);

   (c)  forgery or fraudulent alteration of a cheque or other negotiable
        instrument;

   (d)  fraudulent use of an information system; and

   (e)  forged or fraudulent instructions relating to the client assets.

2. For the purposes of this Schedule- "employee" (僱員), in relation to a
specified licensed corporation (or its associated entity or service bureau),
includes an individual who is or has been an employee, officer or licensed
representative of, or who is or has been engaged whether under a contract of
service or otherwise by, the specified licensed corporation (or its associated
entity or service bureau); "service bureau" (服務單位), in relation to a
specified licensed corporation, means a person to whom the
specified licensed corporation has delegated the duty to perform certain
functions that are ancillary to the carrying on by the
specified licensed corporation of any regulated activity. "employee" (僱員)
"service bureau" (服務單位)