On 9 December 2022, our firm successfully co-organised a “ESG Sharing: Taking ESG from Concept to Action” seminar with Roma Group (hkex: 8072), Workiva (NYSE: WK) and Formex Financial Press. Our Partner Mr. Gordon Tsang and Associate Mr. Ben Chan spoke on the topic “New Amendments to the Corporate Governance Code for Listed Companies”. They explained The Stock Exchange of Hong Kong Limited’s (the Exchange) new amendments on the Corporate Governance Code and Related Listing Rules, such as the board’s independence and diversity, communications with shareholders, and ESG. Gordon and Ben also joined the other guest speakers, including the Director of Roma Risk Advisory Limited, Mr. Kingsley Cheng, Regional Sales Director of Workiva, Ms. Olivia Wong, and Company Secretary (hkex: 1709 & 756), Ms. Mina Chin, in the fireside chat to share their insights on the ESG trends in companies’ strategy and governance.

Our Partner Mr. Gordon Tsang (Top Right)

Our Partner Mr. Gordon Tsang (top right corner on the screen) and Associate Mr. Ben Chan shared on the topic “New Amendments to the Corporate Governance Code for Listed Companies”

From the left: Director of Roma Risk Advisory Limited, Mr. Kingsley Cheng, Company Secretary (hkex: 1709 & 756), Ms. Mina Chin, our Associate Mr. Ben Chan, Regional Sales Director of Workiva, Ms. Olivia Wong, and Manager of Roma Group, Ms. Natalie Chan

From the left: Our Associate Mr. Gary Kwok, Associate Mr. Ben Chan, Manager of Roma Group, Ms. Natalie Chan, and our Marketing and Communications Executive, Ms. Julia Yeung

Please contact our Partner Mr. Gordon Tsang for any enquiries or further information.

Introduction

On 31 October 2022, the Securities and Futures Commission of Hong Kong (“SFC”) issued a circular regarding virtual assets (“VA”) ¹futures exchange traded funds (the “Circular”). The Circular sets out the requirements under which the SFC may consider authorising exchange-traded funds (“ETFs”) that obtain exposure to VAs primarily through futures contracts (“VA Futures ETFs”) for public offering in Hong Kong under sections 104 and 105 of the Securities and Futures Ordinance (“SFO”).
As noted in the Circular, the SFC is prepared to accept applications for authorisation of VA Futures ETFs. The SFC will keep in view and closely monitor the development of the VA market and its regulatory landscape regarding the appropriateness of authorisation of ETFs that invest directly in spot VAs.
The Circular was published soon after the Hong Kong government issued a policy statement on the development of VA (the “Policy Statement”) relating to, among others, non-fungible token issuance, green bond tokenisation, and e-HKD (see our news update on the Policy Statement here).

Key Authorisation Requirements for VA Futures ETFs

General Requirements
VA Futures ETFs seeking SFC authorisation to enable the public offering of interests in Hong Kong should meet the applicable requirements in the Overarching Principles Section and the Code on Unit Trusts and Mutual Funds in the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products.

Additional Requirements
VA Futures ETFs which seek SFC authorisation for public offering in Hong Kong shall meet additional requirements set ou the Circular as summarised below:

Management Companies
The management company of a VA Futures ETF must have (i) a good track record of regulatory compliance; and (ii) demonstrate at least three years of proven track record in managing ETFs. The SFC will also consider relevant experience in managing the same or similar type of products from the group of companies to which the management company belongs. The SFC may also consider accepting delegation or co-management of a VA Futures ETF, provided that the management company in the case of delegation or at least one of the management companies in the case of co-management complies with the relevant requirements.

Eligible Futures
Only VA futures traded on conventional regulated futures exchanges are allowed, subject to the relevant management company demonstrating (i) the relevant VA futures have adequate liquidity for the operation of the VA Futures ETF; and (ii) the roll costs of the relevant VA futures contracts are manageable which includes how roll costs will be managed. Initially, only Bitcoin futures and Ether futures traded on the Chicago Mercantile Exchange will be permitted. The SFC shall consider expanding the scope of eligible VA futures markets in the future as appropriate.

Investment Strategy
The management company of a VA Futures ETF is expected to adopt an active investment strategy to allow flexibility in portfolio composition (such as diversification of futures positions with multiple expiry dates), rolling strategy and handling of any market disruption events. The net derivative exposure of a VA Futures ETF shall not exceed 100% of the total net asset value of the relevant ETF.

Disclosure
The product key facts statement of a VA Futures ETF should contain upfront disclosure of the investment objective and key risks associated with investment in VA futures contracts, including (1) risks concerning potentially large roll costs of VA futures; and (2) operational risks, such as margin risk and risk associated with mandatory measures imposed by relevant parties.

Distribution
Since VA Futures ETFs are derivative products and VA-related products, intermediaries are subject to the applicable requirements under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”) and related guidelines including the Joint Circular on Intermediaries’ Virtual Asset-Related Activities (the “Joint Circular”) issued by the SFC and the Hong Kong Monetary Authority in January 2022 (see our news update on the Joint Circular here). In particular, intermediaries shall comply with the existing conduct requirements for derivative products as set out under paragraphs 5.1A and 5.3 of the Code of Conduct, as well as the VA-knowledge test requirement.

Investor Education
The management company of a VA Futures ETF should carry out extensive investor education before launching the VA Futures ETF in Hong Kong.

Please contact our Partner Mr. Rodney Teoh and associate Mr. Calvin KW Lo for any enquiries or further information. Rodney would like to thank Ms. Adrienne Leung (Intern) for her contribution to this news update.

This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

¹ VA refers to digital representations of value, which may be in the form of digital tokens, such as utility tokens, stablecoins, security-backed tokens or asset-backed tokens, or any other virtual commodities, crypto assets or other assets of the same nature, irrespective of whether or not they amount to “securities” or “futures contracts” as defined under the SFO but excludes digital representations of fiat currencies issued by central banks.

On 1 December 2022, our Partners and Heads of SW Private Client, Ms. Catherine Por and Ms. Wendy Lam, were invited by HSBC Global Private Banking to attend the Trust and Wealth Planning Christmas Cocktail Reception at HSBC Main Building in Central.

HSBC Global Private Bank is our long-term partner in private wealth solutions for high-net-worth individuals. We would like to take this opportunity to thank HSBC Global Private Banking for the invitation and the wonderful evening.

Our Partner Ms. Lam won a prize in the lucky draw.

For more information, please contact our Partners Ms. Catherine Por or Ms. Wendy Lam.

Asian Legal Business (ALB) has recently published its research findings of the top 50 largest law firms in Asia. We are pleased to announce that our firm has been ranked as the 4th Hong Kong Largest Domestic Firm. Our firm has been ranked as one of the top 5 largest domestic firms in Hong Kong for 7 consecutive years.

In addition, we would like to congratulate our associated firm, AllBright Law offices, for being ranked as the 5th Largest Domestic Firm among all Asian law firms.

About ALB Asia Top 50

ALB Asia Top 50 law firm is an annual list to identify and rank the largest law firms across Asia by their size and number of lawyers. Separate tables are divided for the domestic and international law firms in jurisdictions including China, Hong Kong, Japan, Singapore, and South Korea.

For more information, please contact our Partner Mr. Willy Cheng, or visit the rankings on ALB’s website here .

Following the US$165 million and US$58.6 million offshore bond issuances earlier in May and June this year, (see our news updates in June and July , respectively), Stevenson, Wong & Co. acted for Zunyi Road and Bridge Construction (Group) Limited (the “Issuer”) in its successful issue of US$45 million 7.5% 3-year offshore bonds due 2025. Pulsar Capital Limited and Shenwan Hongyuan Securities (H.K.) Limited acted as the joint global coordinators, joint lead managers and joint bookrunners for this issuance.

The Issuer, established in the PRC, is a large construction company headquartered in Zunyi, Guizhou province. Its business primarily focuses on infrastructure projects in Zunyi and other cities in Guizhou province. The Issuer has also obtained a broad range of industry qualifications, as well as an entity credit rating of “AA+”.

Our team was led by our partner Mr. Rodney Teoh, supported by team members including Ms. Angela Lau (associate), Mr. Calvin KW Lo (associate), Ms. Jess Chung (trainee solicitor) and Ms. Cheyenne Xing (paralegal).

Please contact our partner Mr. Rodney Teoh and associate Ms. Angela Lau for any enquiries or further information.

This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

(中文) 2022年11月16日, 本所合伙人，诉讼及争议解决部主管徐凯怡律师、与<法律顾问李明茵律师、黄晊晄高级律师和市场及传讯主管杨诗雅一同出席了于香港会所举行的英国特许仲裁学会(东亚分会) (CIArb EAB) 50周年晚宴。前终审法院首席法官马道立获邀莅临晚宴, 并就“仲裁员、司法行政和公共利益：可以同时提及吗？(Arbitrators, the administration of justice and the public interest: can they be mentioned in the same breath?)”为题进行了分享。此外，两位前律政司司长袁国强资深大律师、郑若骅资深大律师、以及现任律政司司长林定国资深大律师和 CIArb EAB 主席方兆文博士亦莅临该晚宴。

英国特许仲裁学会 (东亚分会) 主席方兆文博士 (左三)、华南 (香港) 国际仲裁院副秘书长及董事局秘书李雄风先生 (左四) 和本所徐凯怡律师 (左二)

现任律政司司长林定国资深大律师 (右) 和本所徐凯怡律师 (左)

若阁下想了解更多详情，请联络本所合伙人徐凯怡律师。