Hong Kong Regulations

SECURITIES AND FUTURES (DISCLOSURE OF INTERESTS-SECURITIES BORROWING AND LENDING) RULES - SECT 7

Prescribed interests and short positions in shares of a regulated person to be disregarded for the purpose of notification

(1) Subject to subsections (2), (3) and (4), the following interests or
classes of interests, and short positions or classes of short  positions, are
prescribed for the purposes of section 323 of the Ordinance-

   (a)  an interest or short position in the shares of a regulated  person
        where the shares-

        (i)    have been borrowed by the regulated person under a relevant 
               agreement; and

        (ii)   are used, or are intended to be used, by the regulated person
               or by a related corporation of the regulated person within 5
               business days after the date on which the shares were acquired
               by the regulated person for a prescribed purpose; and

   (b)  an interest or short position in the shares of a regulated  person
        where the shares-

        (i)    in the case where shares have been lent by the regulated person
               under a relevant agreement to a borrower, are returned to the
               regulated  person under the relevant agreement by the borrower;
               and

        (ii)   are used, or are intended to be used, by the regulated person
               or by a related corporation of the regulated person within 5
               business days after the date on which the shares were returned
               to the regulated person for a prescribed purpose.

(2) Where the shares are not used for a prescribed purpose by the
regulated person, or by a related corporation of the regulated person, within
the period of 5 business days as specified in subsection (1)(a)(ii) or
(b)(ii), the regulated person is taken to have acquired an interest or come to
have a short position (as the case may be) in the shares for the purposes of
Divisions 2 to 5 of Part XV of the Ordinance on the last day of that period.

(3) Where the shares are used for a purpose, other than a prescribed purpose,
by the regulated person, or by a related corporation of the regulated person,
within the period of 5 business days as specified in subsection (1)(a)(ii) or
(b)(ii), the regulated person is taken to have acquired an interest or come to
have a short position (as the case may be) in the shares for the purposes of
Divisions 2 to 5 of Part XV of the Ordinance on the day that the shares are
used for that purpose.

(4) If a regulated person fails to comply with any requirement imposed under
section 10, all interests and short positions of the regulated person in
shares that are interests and short positions prescribed under subsection (1)
shall cease to be such prescribed interests and short positions and the
regulated person is taken, for the purposes of Divisions 2 to 5 of Part XV of
the Ordinance, to have acquired an interest and come to have a short position
in the shares-

   (a)  in the case of a failure to comply with section 10(1), on the last day
        of the period within which the regulated person is required to make
        the record;

   (b)  in the case of a failure to comply with section 10(3)(a), on the first
        day that the regulated person fails to retain the record; or

   (c)  in the case of a failure to comply with section 10(3)(b), on the last
        day of the period within which the regulated person is required to
        provide the record, and subsection (1) shall not apply to any interest
        or short position in shares of the regulated person after that day.