HONG KONG Law and Practice Contributed by: Vincent Sum and Sylvia Leung, Mayer Brown
to obligors and would sell the loan receivables to the issuer. Originators are often large com - mercial enterprises or financial institutions. Refer to 2.2 Sponsors . 2.4 Underwriters and Placement Agents An underwriter or a placement agent is often referred to generally as an “arranger” in a secu - ritisation in Hong Kong. Typically, the arranger is an investment bank, with the following functions: • assisting the originator in devising the overall securitisation structure; • advising the originator on the viability of the transaction; and • identifying and liaising with potential inves - tors. The arranger that acts as an underwriter also enters into the subscription agreement with the issuer for underwriting all or a part of the securi - ties to be issued. Sometimes, an arranger also invests in the notes, through an affiliate. 2.5 Servicers A “servicer” manages or administers the under - lying assets on behalf of the SPE. Their duties include collecting payments from the obligors of the loans or receivables, ensuring timely trans - fer of collected funds to the secured accounts charged to the security trustee, and monitoring communications with the obligors and managing any issues like delinquencies or defaults. Where the assets are securities such as equities and debt securities, the servicer could be a profes - sional portfolio manager. Servicers in securitisation transactions are typi - cally financial institutions or specialised firms with expertise in asset management and servic - ing. Originating banks and loan originators often also act as primary servicers due to their existing
relationship with the obligors, and with the third- party servicing firms involved. Depending on the nature of the assets being ser - viced or managed, servicers may need specific permissions, licences or authorisations under Hong Kong laws. These may include banking and SFC licences for debt collection or asset management. 2.6 Investors An investor purchases the assets-backed secu - rities from the SPE. Their key responsibility includes to perform independent due diligence so as to assess risks and potential returns, evaluate the quality and structure of the under - lying assets, and to make investment decisions. Investors can be pension funds, insurance companies, investment fund managers, com - mercial banks, governmental entities, and other institutional or professional investors. Investors provide the capital needed, enabling the asset originators to convert illiquid assets into liquid capital, and in return, earn profits based on the income from the underlying assets. 2.7 Bond/Note Trustees The use of bond/note trustees is not legally required under the law but they are necessary from an operational standpoint. Bond/note trus - tees are typically financial institutions like banks or professional trust companies. They act as fiduciaries for bondholders, monitor the day-to day compliance by the issuer and other obligors with their obligations under the bond agree - ment but only to the extent required, and act on matters related to the bondholders’ protec - tion, especially in situations like defaults. They manage payments to bondholders and facilitate communication between the issuer and inves - tors. When bond/note trustees are not used, their roles might be performed by other trans -
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