SFC Updates Criteria for Professional Investors in Hong Kong

The Securities and Futures Commission (SFC) has expanded the criteria for professional investors in Hong Kong on Friday. According to a statement from the regulator, the changes mean that holding companies can now qualify for the status of a professional investor if they fully-own a company that has the status already.

The amendments were made to the Securities and Futures (Professional Investor) Rules (PI Rules) and are effective from July 13, 2018. Furthermore, the statement advises directors of holding companies need to ensure that shareholders are notified when a company becomes a professional investor.

On May 18, 2018, the SFC concluded the consultation for the above new rules. In its statement at the time, the watchdog stated that the new rules aimed to allow portfolios held in joint accounts with non-associates and in investment corporations, that are completely owned by an individual, to count towards meeting the threshold to qualify as a professional investor.

In May, Julia Leung, the SFC's Deputy Chief Executive Officer and Executive Director of Intermediaries commented on the new rules: "The changes to the rules for prescribing professional investors are in the best interest of the industry to ensure a level-playing field [sic] and consistent application of the regulations. They will introduce consistency and flexibility and this will better serve the interests of both firms and their clients."

Amendments to Take Over codes

The SFC also announced that it has made amendments to the Codes on Takeovers and Mergers and Share Buy-backs (Codes). The changes, which are effective from today, seek to increase investor protection.

Among the changes were measures that empower the Takeovers Panel, a supervisory board within the SFC, to require shareholders be paid compensation if they have suffered as a result of the takeover.

Commenting on the new changes, Ashley Alder, the SFC’s Chief Executive Officer said: "The changes to the takeovers rules aim to protect shareholders and ensure a fair and informed market. They are also in line with our front-loaded approach to prevent breaches before they occur."