HONG KONG Law and Practice Contributed by: Vincent Sum and Sylvia Leung, Mayer Brown
• make quarterly announcements following any suspension of trading. Unlisted Structured Products The Code on Unlisted Structured Investment Products promulgated by the SFC also sets forth certain disclosure requirements that might be applicable in a securitisation transaction in Hong Kong as securitisation is considered a structured investment. For instance, the prospectus for the debt securi - ties should contain a description of the key com - ponents of the transaction structure, a descrip - tion of the events of default in which the debt securities may be terminated before the sched - uled maturity and the rights of the investors in the event of such termination. Prospectus As noted, a prospectus is used to satisfy the dis - closure requirements. The prospectus typically summarises the transaction structure, describes the relevant parties, the characteristics of the securitised assets and the terms and condi - tions of the notes, and lays out the materially important risks that potential investors should consider when deciding whether or not to invest in the notes or securities. Where a prospectus is not explicitly required under the law (eg, in certain private issuances), an offering circular or offering memorandum is normally produced for disclosure to investors. Contents typically follow those in public trans - actions. Misinformation Where the prospectus contains misstatements that cause an investor to incur loss or damage, civil liability may arise under Section 40 of the CWUMPO, and the following persons could be
liable to pay compensation to the investor for such loss or damage: • directors of the issuer at the time of the issu - ance; • persons who are named in the prospectus as a director of the issuer; • promoters of the issuer; and • persons who have authorised the issuance of the prospectus. In addition to this civil liability, Section 40A of the CWUMPO states that any person who author - ised the issuance of the prospectus that con - tains untrue statements can also be liable for criminal liability, including imprisonment and a fine. Nevertheless, such person would not be liable for criminal liability if they can prove that the statement in question is not material or that they had reason to believe and did believe that the statement was true. On the other hand, under Section 103(4) of the SFO, a person who makes a public offer - ing of securities without the SFC’s authorisa - tion or exemption can be subject to a fine of HKD500,000 and imprisonment for three years. Where there is a continuing offence, such per - son can be subject to a further daily fine of HKD20,000 for each day that such offence con - tinues. Principal Regulators The principal regulator is the SFC (and also the Hong Kong Stock Exchange in the case of listed debt issuances). For authorised institutions, the Hong Kong Monetary Authority (HKMA) is the principal regulator. Public Market v Private Market In summary, a public offering of asset-backed notes will be subject to the disclosure and reg -
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