Listing on the Main Board under the Listing Rules, sponsors and advisers, notifiable and connected transactions, trading halts, the Stock Market Listing Rules, the Takeovers Code and Share Buy-backs Code, SFC-authorised products and stablecoin licensing. These are original practice notes, not documents of the HKSI Institute or the SFC, based on the texts in force on 1 January 2027. Figures in the Listing Rules, the Codes and the product codes may change: check the version in force.
1. Which ONE of the following is among the matters that the Listing Rules are designed to ensure, according to paragraph 2.03?
Paragraph 2.03 of the Listing Rules says that directors of a listed issuer must “act in the interests of its shareholders as a whole”, particularly where the public is only a minority. The Rules do not guarantee any return and do not compensate investors for price falls: they aim at fair, informed and orderly markets. New equity issues are first offered to existing shareholders by way of rights, so controlling shareholders do not alone approve them.
2. Under rule 3.08 of the Listing Rules, every director must, in performing his duties, act in which ONE of the following ways?
Rule 3.08 of the Listing Rules requires every director to “act honestly and in good faith in the interests of the company as a whole”. The duty is owed to the company itself, not to the shareholder who nominated the director, not to the sponsor that brought the issuer to listing and not to the executive directors, who are only part of the board that is collectively responsible for the issuer.
3. Which ONE of the following statements about the duties of directors under rule 3.08 of the Listing Rules is INCORRECT?
Rule 3.08 of the Listing Rules states that directors do not satisfy the required levels of skill, care and diligence if they pay attention to the issuer's affairs only at formal meetings, so the statement that attending formal board meetings alone meets the standard of care is incorrect. The other three statements are correct: directors must take an active interest, obtain a general understanding of the business and follow up anything untoward, and “Delegating their functions is permissible but does not absolve them from their responsibilities”.
4. Under Chapter 3A of the Listing Rules, a “Compliance Adviser” must be a corporation or authorised financial institution licensed or registered for which ONE of the following regulated activities?
Rule 3A.01 defines a Compliance Adviser as a corporation or authorised financial institution “licensed or registered under the Securities and Futures Ordinance for Type 6 regulated activity” and permitted to undertake sponsor work. Type 1, Type 5 and Type 9 licences do not by themselves qualify, because they cover dealing in securities, advising on futures contracts and asset management rather than advising on corporate finance.
5. For how long must a listed issuer retain a Compliance Adviser after the initial listing of its equity securities, under rule 3A.19 of the Listing Rules?
Under rule 3A.19 the period starts on the date of initial listing and ends on the date on which the listed issuer complies with rule 13.46 for its financial results for the first full financial year after listing. The first annual general meeting, a flat 12 months and three full financial years are not the test in rule 3A.19, so they are wrong.
6. A new applicant has appointed Harbourview Capital Limited as sponsor. Under rule 3A.07 of the Listing Rules, the sponsor is NOT independent if the sponsor group and the directors of the sponsor (and their close associates) collectively hold more than which ONE of the following levels, other than through an underwriting obligation?
Rule 3A.07(1) of the Listing Rules, as in force at 1 January 2027, sets the limit at more than 5% of the issued shares (excluding treasury shares), except where the holding arises from an underwriting obligation. 1% and 10% do not appear in that test. 15% is the threshold used elsewhere in rule 3A.07, for the fair value of the shareholding against the net equity of the sponsor's ultimate holding company and for IPO proceeds used to settle debts, so it is wrong here.
7. Harbourview Capital Limited is the sole sponsor of Starling Bay Holdings Limited, a new applicant. Which ONE of the following circumstances, existing between the Form A1 submission and the listing date, would mean that Harbourview Capital Limited is NOT independent under rule 3A.07 of the Listing Rules?
Rule 3A.07(10) of the Listing Rules makes a sponsor not independent where the sponsor or a member of the sponsor group is the auditor or reporting accountant of the new applicant, and a fellow subsidiary is a member of the sponsor group. The 5% test excludes holdings arising from an underwriting obligation, and Note 2 disregards interests held in a custodial capacity. The proceeds test in rule 3A.07(4) excludes debts that are fees payable under the sponsorship engagement.
8. A new applicant expects the market value of the class of shares for which it seeks a Main Board listing to be HK$4 billion at listing. Under rule 8.08 of the Listing Rules, what is the minimum percentage of that class normally required to be held by the public?
Under the table in rule 8.08 of the Listing Rules, as in force at 1 January 2027, a class with an expected market value not exceeding HK$6,000,000,000 needs a minimum public holding of 25%. 15% and 10% are the floors for the higher bands (over HK$6 billion and over HK$30 billion), and 20% does not appear in the table.
9. Which of the following requirements must a new applicant meet under EACH of the three alternative financial tests in rule 8.05 of the Listing Rules? I. A trading record of at least three financial years II. Management continuity for at least the three preceding financial years III. Ownership continuity and control for at least the most recent audited financial year IV. Positive cash flow from operating activities of at least HK$100 million
Rule 8.05 of the Listing Rules requires, under the profit test, the market capitalisation/revenue/cash flow test and the market capitalisation/revenue test alike, a three-year trading record, three years of management continuity and ownership continuity and control for the most recent audited year, so I, II and III apply to all three. The cash flow requirement of HK$100 million over three financial years applies only to the market capitalisation/revenue/cash flow test, so IV is not common to all three tests.
10. Which of the following actions may a stabilizing manager take under the Securities and Futures (Price Stabilizing) Rules (Cap. 571W)? I. Allocate more securities than initially offered, to prevent or minimize a fall in the market price II. Purchase securities for the sole purpose of preventing or minimizing a fall in the market price III. Purchase securities in order to push the market price above the offer price IV. Take stabilizing action at any time, without limit as to period
Section 7(1)(a)(i) of the Price Stabilizing Rules allows ancillary allocation of a greater number of securities than initially offered, and section 6 allows purchases “for the sole purpose of preventing or minimizing any reduction in the market price”, so I and II are permitted. Pushing the price above the offer price is not a permitted purpose, and section 6 confines primary action to the stabilizing period, so III and IV are wrong.
11. A new applicant will place shares with bookbuilding activities in its IPO. Under rule 3A.43 of the Listing Rules, one overall coordinator must also be appointed as an independent sponsor, both appointments being made at the same time and at least how long before the listing application is submitted?
Rule 3A.43 of the Listing Rules requires that both appointments are made at the same time and “no less than 2 months before the submission” of the listing application to the Exchange. Two weeks is too short, and 3 months and 6 months are longer than any period set by the rule.
12. Under rule 14.06 of the Listing Rules, a disposal by a listed issuer is classified as a very substantial disposal where any percentage ratio is at least what level?
Rule 14.06(4) of the Listing Rules defines a very substantial disposal as one where any percentage ratio is 75% or more. 5% starts a discloseable transaction and 25% a major transaction, while 100% is the threshold for a very substantial acquisition, not a disposal.
13. Which ONE of the following is NOT one of the percentage ratios in rule 14.07 of the Listing Rules used to classify a notifiable transaction?
Rule 14.07 of the Listing Rules lists five percentage ratios: the assets ratio, profits ratio, revenue ratio, consideration ratio and equity capital ratio. A debt ratio is not one of them, whereas the assets ratio, the profits ratio and the revenue ratio all are.
14. Under rule 14.06B of the Listing Rules, a reverse takeover is best described as which ONE of the following?
Rule 14.06B of the Listing Rules describes a reverse takeover as an acquisition which, in the Exchange's opinion, is “an attempt to achieve a listing of the acquisition targets” and a means to circumvent the requirements for new applicants in Chapter 8. It is a principle-based test: payment in new shares is not the test, a disposal to the controlling shareholder is not an acquisition at all, and a percentage ratio of 100% or more makes a very substantial acquisition, which is normally a reverse takeover under the bright line tests only when combined with, for example, a change in control.
15. Which of the following persons are connected persons of a listed issuer under rule 14A.07 of the Listing Rules? I. A director of a subsidiary that generates 40% of the group's revenue II. A person who was a director of the listed issuer in the last 12 months III. A person who ceased to be a director of the listed issuer 18 months ago and has no other connection with it IV. A person deemed to be connected by the Exchange
Rule 14A.07 of the Listing Rules includes a director of the issuer or any of its subsidiaries, a person who was a director in the last 12 months and a person deemed to be connected by the Exchange, so I, II and IV are connected persons; the subsidiary in I is not an insignificant subsidiary under rule 14A.09, because its revenue is well above 10% of the group's. A former director who left 18 months ago is outside the 12-month period and, with no other connection, is not a connected person, so III is wrong.
16. Cedar Peak Holdings Limited, a listed issuer, buys equipment for HK$20 million, on normal commercial terms, from a company owned by Mr Chan, one of its own directors. Every percentage ratio other than the profits ratio is 3%. Under rule 14A.76 of the Listing Rules, which ONE of the following is the treatment of the transaction?
Under rule 14A.76(2) of the Listing Rules a connected transaction on normal commercial terms is exempt from the circular (including independent financial advice) and shareholders' approval requirements if all ratios other than the profits ratio are below 5%. Full exemption needs a ratio below 0.1%, or below 5% with consideration under HK$3,000,000, and the consideration here is HK$20 million. The other two options impose circular or approval requirements that do not apply at 3%.
17. In a connected transaction that needs independent shareholders' approval, to whom does the independent financial adviser appointed under rule 14A.44 of the Listing Rules make recommendations?
Rule 14A.44 of the Listing Rules requires the issuer to appoint an “independent financial adviser acceptable to the Exchange to make recommendations to the independent board committee and shareholders”. The adviser does not report jointly to the Exchange and the SFC, to the sponsor and auditors, or to the connected person and the executive directors, who are not independent of the transaction.
18. Under the Securities and Futures (Stock Market Listing) Rules (Cap. 571V), within what time must a listing applicant file a copy of its application with the Commission after submitting it to a recognized exchange company?
Section 5(1) of the Stock Market Listing Rules requires the applicant to file a copy with the Commission within one business day after the day on which the application is submitted to the exchange company. Under section 5(2) the duty is treated as met on the day of submission if the applicant has authorised the exchange company in writing to file it. Three, five and ten business days are all too long.
19. Under section 9 of the Securities and Futures (Stock Market Listing) Rules (Cap. 571V), the Commission may after a suspension permit dealings to resume or direct the cancellation of a listing. How may it exercise these powers?
Section 9(6) of the Stock Market Listing Rules provides that the Commission's powers under section 9 “may only be exercised by a meeting of the Commission and are not delegable”. They cannot be exercised by a single Executive Director, by the Chief Executive Officer alone or by the exchange company, which is the body that must carry out the Commission's direction.
20. The SFC considers that a circular issued by Starling Bay Holdings Limited, a listed issuer, contains materially misleading information. Under section 8 of the Securities and Futures (Stock Market Listing) Rules (Cap. 571V), what may the Commission do?
Under section 8(1) of the Stock Market Listing Rules, where materially false, incomplete or misleading information appears in a document issued in connection with the issuer's affairs, the Commission may “direct the recognized exchange company to suspend all dealings in any securities specified in the notice”. The power does not run through the Court, the Market Misconduct Tribunal or the sponsor, which has no role in suspending trading.
21. Which ONE of the following statements about trading halts and suspensions under Chapter 6 of the Listing Rules is INCORRECT?
Rule 6.01 of the Listing Rules lets the Exchange direct a trading halt, suspend dealings or cancel a listing “whether requested by the issuer or not”, so the statement that the Exchange must receive the issuer's request before suspending dealings is incorrect. The other statements are correct: rule 6.03 puts the burden on the requesting issuer to show that a halt or suspension is appropriate, and rule 6.01(4) covers an issuer no longer suitable for listing.
22. Under rule 14A.09 of the Listing Rules, which ONE of the following is one basis on which a subsidiary is an “insignificant subsidiary” of a listed issuer, by reference to its total assets, profits and revenue compared with the group's?
Rule 14A.09 of the Listing Rules defines an insignificant subsidiary as one whose total assets, profits and revenue are each below 10% for each of the latest three financial years, or below 5% for the latest financial year. A 10% test over only two financial years applies only where the subsidiary has existed for less than three, because the rule then looks at the period since its incorporation or establishment; otherwise it looks at the latest three financial years, or at 5% for the latest one, and 15% and 25% do not appear in it.
23. Which ONE of the following statements about the legal status of the Takeovers Code issued by the SFC is CORRECT?
Paragraph 1.3 of the Introduction to the Codes states: “The Codes do not have the force of law.” They are issued by the SFC in consultation with the Panel (paragraph 1.1), so they are not subsidiary legislation, a statute or a Stock Exchange rulebook. Breaches are dealt with through disciplinary proceedings before the Panel, not prosecution, and the Listing Rules expressly require compliance with the Codes (paragraph 1.4).
24. In the Takeovers Code, which ONE of the following is the meaning of the “Executive”?
The Definitions section states: “Executive means the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director.” The Executive is therefore SFC staff, not an officer of the Stock Exchange. It is also distinct from the Takeovers and Mergers Panel, a committee established under section 8 of the SFO, and has nothing to do with the Intermediaries Division.
25. Under the Definitions in the Takeovers Code, “control” is deemed to mean a holding, or aggregate holdings, of what proportion of the voting rights of a company?
The Definitions state that “control shall be deemed to mean a holding, or aggregate holdings, of 30% or more of the voting rights of a company”, whether or not it gives de facto control. 50% is a common but wrong answer: it is only the upper limit of the Rule 26.1(c) creeper band, not the definition of control. 35% and 75% do not appear in the definition.
26. Mr Chan holds 22% of the voting rights of Greenfield Holdings Limited, a company with a primary listing of its equity securities in Hong Kong. In one week he buys a further 9% on the market, taking him to 31%, and the Executive has granted no waiver. Which ONE of the following is CORRECT?
Under Rule 26.1(a) of the Takeovers Code, a person who acquires 30% or more of the voting rights of a company, whether by a series of transactions or not, must extend offers “to the holders of each class of equity share capital of the company, whether the class carries voting rights or not”. An offer limited to holders of voting shares is therefore wrong, because non-voting equity shares must also be included. The trigger is 30%, not 50%, and no 12-month holding period applies to Rule 26.1(a); the 12 months are relevant only to the 2% creeper in Rule 26.1(c).
27. Ms Lam held 35% of the voting rights of Lotus Harbour Holdings Limited, a public company in Hong Kong, throughout 2026. She bought a further 1.5% in January 2027 and buys another 1% on 2 March 2027. No waiver applies. Which ONE of the following is CORRECT?
Rule 26.1(c) of the Takeovers Code applies to a person holding not less than 30% but not more than 50% whose acquisition increases the holding “by more than 2% from the lowest percentage holding of that person in the 12 month period ending on and inclusive of the date of the relevant acquisition”. Her lowest holding in that period is 35%, and the purchase on 2 March 2027 takes her to 37.5%, an increase of 2.5%, so an offer is required; the January purchase of 1.5% alone did not exceed 2%. The size of the single purchase is irrelevant because the test is cumulative, 50% is the upper limit of the creeper band rather than its trigger, and she did not cross 30% on 2 March 2027, so Rule 26.1(a) is not the reason.
28. Under Rule 26.3 of the Takeovers Code, a mandatory offer must be in cash, or be accompanied by a cash alternative, at not less than the highest price paid by the offeror or its concert parties for shares of that class during which period?
Rule 26.3(a) requires the cash price to be not less than the highest price paid “during the offer period and within 6 months before its commencement”. The 12-month period is the look-back used in the creeper test of Rule 26.1(c), a different rule. The 1-month and 3-month periods do not appear in Rule 26.3.
29. Mr Chan now holds 32% of the voting rights of a company with a primary listing in Hong Kong and must make a mandatory offer under Rule 26 of the Takeovers Code. The Executive has given no consent to vary the usual terms. Which ONE of the following conditions may he attach to the offer?
Rule 26.2(a) of the Takeovers Code provides that, except with the consent of the Executive, offers under Rule 26 “must be conditional only upon the offeror having received acceptances in respect of voting rights” which, with those already held or acquired, give the offeror and its concert parties more than 50% of the voting rights. Rule 26.2(b) bars any acquisition triggering an offer if the offer would depend on a resolution at a meeting of the offeror’s shareholders, so approval by his own shareholders cannot be a condition. A 75% acceptance threshold or a condition of acceptance by a majority of independent shareholders is not allowed by Rule 26.2.
30. Which ONE of the following is a company to which the Takeovers Code and the Share Buy-backs Code apply under section 4.1 of the Introduction to the Codes?
Paragraph 4.1 of the Introduction provides that the Codes apply to takeovers, mergers and share buy-backs affecting “public companies in Hong Kong, companies with a primary listing of their equity securities in Hong Kong” and the other companies it describes. The Codes concern the companies affected by a transaction, so holding an SFC licence is irrelevant, and a sole proprietorship is not a company. A company with no Hong Kong listing and no Hong Kong shareholders has no link to the Codes.
31. Which ONE of the following is CORRECT about a share buy-back made by general offer to shareholders?
Paragraph 4.4 of the Introduction states that share buy-backs by general offer are considered to be offers, so “the Rules of the Takeovers Code will apply, mutatis mutandis, in addition to the Rules of the Share Buy-backs Code”. Shareholder approval does not disapply either Code. Applying only one of the two Codes is wrong because both apply together.
32. According to paragraph 1.5 of the Introduction to the Codes, the responsibilities provided for in the Takeovers Code and the Share Buy-backs Code apply to which of the following? I. Directors of companies that are subject to the Codes II. Professional advisers of those involved in transactions under the Codes III. Persons who seek to gain or consolidate control of companies subject to the Codes IV. Persons who are actively engaged in the securities market
Paragraph 1.5 lists those to whom the responsibilities apply: directors of companies subject to the Codes, management companies and trustees of REITs, persons seeking to gain or consolidate control, their professional advisers, persons otherwise connected with the transactions, and “persons who are actively engaged in the securities market”. All four propositions are therefore covered, so each shorter combination leaves out at least one group that is caught.
33. If the Takeovers Panel finds that there has been a breach of the Codes or of a ruling, which of the following sanctions may it impose under section 12.2 of the Introduction to the Codes? I. Public censure II. A prison sentence of up to 2 years III. Banning advisers from appearing before the Executive or the Panel for a stated period IV. A financial penalty of up to HK$10 million
Section 12.2 lists the sanctions available to the Panel: a public statement which involves criticism, public censure, a requirement that licensed persons or relevant individuals do not act for a non-complying person for a stated period, “banning advisers from appearing before the Executive or the Panel for a stated period”, and requiring further action as the Panel thinks fit. Public censure and the adviser ban are therefore available. The section provides for neither a prison sentence nor a financial penalty, so the combinations containing those propositions are wrong; the 2 years and the HK$10 million in the propositions appear nowhere in the section.
34. Which ONE of the following statements about the Takeovers Code and the Share Buy-backs Code is INCORRECT?
Paragraph 1.8 of the Introduction states: “The Codes are not concerned with the financial or commercial advantages or disadvantages of a takeover, merger or share buy-back”, so the Executive does not assess commercial merit; this is a matter for the company and its shareholders. The other statements are correct: paragraph 1.2 gives the purpose as fair treatment for shareholders, by equal treatment and by disclosure of timely and adequate information, and section 2 of the Introduction says the Codes, through the General Principles, may apply to situations not specifically covered by any Rule.
35. Ms Lam, a licensed representative of Harbourview Securities Limited, tells Client K that a unit trust is authorised by the SFC under section 104 of the SFO, so the SFC has recommended it. Which ONE of the following is CORRECT?
Where a product is described as authorised, paragraph 1.10 of the Overarching Principles Section requires a prominent note: “SFC authorization is not a recommendation or endorsement of a product”, and it does not guarantee the commercial merits or performance of the product. Ms Lam’s statement is therefore wrong, and the reason is not that authorisation is a recommendation or a performance guarantee. Under section 104(1) of the SFO it is the Commission, not the HKMA, that may authorise a collective investment scheme.