Hong Kong Regulations

SECURITIES AND FUTURES (FINANCIAL RESOURCES) RULES - SECT 42

Provision of securities margin financing

(Past version on 01/04/2003).

(1) A licensed corporation licensed for Type 1 or Type 8 regulated activity
shall include in its ranking liabilities the amount, when calculated on a
client-by-client basis, by which-

   (a)  any amount receivable from any of its margin clients; or

   (b)  in the case of a group of related margin clients, the aggregate of
        amounts receivable from the group, included in its liquid assets under
        section 22(1), exceeds 10% of the aggregate of amounts receivable from
        its margin clients included in its liquid assets in accordance with
        that section.

(2) Where a licensed corporation licensed for Type 1 or Type 8 regulated
activity obtains any financial accommodation wholly or partly secured by
collateral provided by any of its margin clients, it shall include in its
ranking liabilities the amount by which such financial accommodation exceeds
80% of the aggregate of amounts receivable from its margin clients arising
from the provision of securities margin financing. (L.N. 117 of 2006)

(3) In subsection (1), "group of related margin clients"
(一組關連保證金客 戶) means any 2 or more margin clients of a
licensed corporation licensed for Type 1 or Type 8 regulated activity and-

   (a)  where it is a group of 2 margin clients, one is the spouse of the
        other;

   (b)  where one or more of the margin clients are corporations, one is in
        control, either alone or with his spouse, of 35% or more of the voting
        rights of that other margin client or each of the other margin 
        clients (as the case may be); or

   (c)  where the margin clients are corporations, they are members of the
        same group of companies.

"group of related margin clients" (一組關連保證金客戶)