Hong Kong Regulations

SECURITIES AND FUTURES (FINANCIAL RESOURCES) RULES - SECT 47

Net underwriting commitments

(1) Subject to subsection (2), a licensed corporation which underwrites or
sub-underwrites an issue or a sale of securities shall include in its
ranking liabilities-

   (a)  in the case of a rights issue-

        (i)    where the market price of the securities is less than or equal
               to their subscription price, the aggregate of- (A) 50% of the
               haircut percentage in relation to the securities multiplied by
               the net underwriting commitment; and (B) the amount by which
               the net underwriting commitment exceeds the market value of the
               securities; or

        (ii)   where the market price of the securities is greater than their
               subscription price, 5% of the haircut percentage in relation to
               the securities multiplied by the net underwriting commitment;
               or

   (b)  in any other case, 50% of the haircut percentage in relation to the
        securities multiplied by the net underwriting commitment.

(2) This section does not apply to a licensed corporation on the day on which
it acquires an underwriting or a sub-underwriting commitment in respect of an
issue or a sale of securities and the business day following that day.

(3) For the purposes of subsection (2), a licensed corporation acquires an
underwriting or a sub-underwriting commitment in respect of an issue or a sale
of securities at the later of-

   (a)  the time when it commits itself to underwrite or sub-underwrite the
        securities; and

   (b)  the time when the lead underwriter or co-lead underwriter signs the
        underwriting agreement with the issuer or the seller (as the case may
        be) of the securities.

(4) In subsection (1), "net underwriting commitment" (包銷承擔淨額)
means the total costs of subscribing for or purchasing securities underwritten
or sub-underwritten by a licensed corporation other than-

   (a)  securities which are sub-underwritten; and

   (b)  securities which are the subject of a legally binding contract for the
        subscription for or purchase of such securities, through or from that
        licensed corporation by another person.

"net underwriting commitment" (包銷承擔淨額)